Democratic Senate control will give Biden freer hand in pursuing tax agenda

Biden desires to make use of the additional cash to pay for a far-reaching home agenda, with new spending on well being care, infrastructure, low-income colleges and local weather initiatives. His strategy could be a pointy flip from the previous 4 years, throughout which the Trump administration pursued an agenda that cut taxes for companies and the super-rich.

Democratic control of the Senate, after a pair of wins in a runoff election in Georgia this month, will give Biden extra flexibility in pursuing his tax agenda, analysts mentioned, though they cautioned that the slim 50-50 margin — with Vice President-elect Kamala D. Harris casting tie-breaking votes — will restrict the Biden administration’s capability to pursue its most bold targets, notably elevating the tax price for companies.

First and foremost, specialists mentioned, Biden will have a comparatively simple time pushing via tax cuts he has proposed for modest earners and the center class, comparable to increasing the kid tax credit score all through the financial disaster, and everlasting tax cuts to ease the burden of paying for medical insurance, baby care and a primary residence.

Those sorts of strikes are fashionable with reasonable Democrats and a few Republicans. In 2019, Sens. Mitt Romney (R-Utah) and Michael F. Bennet (D-Colo.) put forth a bipartisan plan for increasing the kid tax credit score, an indication that the Biden administration could possibly discover Republican allies on the problem.

“That is one potential area where the Biden administration might like to explore,” mentioned Garrett Watson, a senior coverage analyst on the conservative-leaning Tax Foundation. Watson mentioned he views “any tax relief or tax changes that are more generous to taxpayers as part of any stimulus that may happen” as particularly likely this year.

Given their thin margins, Democrats will have to pursue policies that unite progressives who want the wealthy to contribute more and moderates who are skittish about increasing taxes during the worst economic crisis in decades. For instance, moderate Democrats may oppose raising the corporate tax rate from 21 percent to 28 percent, as well as Biden’s wish to raise taxes on capital gains, experts said.

“People need to be careful about overstating what they think Biden can get done,” said Howard Gleckman, a senior fellow at the Urban Institute’s Tax Policy Center. “A lot of what happens in the Senate will depend on the support of moderate to conservative Democrats” such as Sens. Joe Manchin III (W.Va.) and Jon Tester (Mont.), he said.

Biden’s best chance of getting corporate tax increases through would be to make technical changes to existing tax laws, such as the tax treatment of corporate deductions, Gleckman said. That could include raising taxes on the foreign income of U.S.-based multinational companies, which could draw on bipartisan support for boosting domestic manufacturing; eliminating or lowering the tax deduction for corporate interest payments; and reducing firms’ ability to use their business losses to receive refunds for past taxes.

Democrats may try to add some of their tax priorities to the next stimulus bill meant to address economic distress resulting from the coronavirus pandemic. Sen. Charles E. Schumer (D-N.Y.) has said that $2,000 stimulus checks will be a priority for Democrats in Congress.

The Biden administration will also probably look closely at what tax policy changes it can make through a bureaucratic legislative tool called the reconciliation process, an expedited form of lawmaking on budget issues that was used in the Trump era to pass tax cuts for the wealthy and corporations. Reconciliation bills are not subject to filibusters, which means they need only a simple majority to pass, although those measures generally can contain only provisions related to the federal budget.

Biden has a plethora of priorities to choose from as he tries to craft a strategy for how to get his policies through Congress — including on taxes, health care and infrastructure.

“This is really the single most important question Biden has to answer, is how much stuff does he try to jam into that reconciliation bill?” Gleckman mentioned. “He’s going to have to pick and choose.”

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