Biden infrastructure/tax increase megathread

[jaichind]

Republicans insist on protecting wealthy tax dodgers at the expense of infrastructure:

Senator: Bipartisan infrastructure bill loses IRS provision

The deal keeps getting worse and worse.  I am nearly at the point at which I want the bipartisan infrastructure plan to fail, and just do one massive combined infrastructure bill under reconciliation.  

I thought that the problem with reconciliation only bill is that due to the 10 year role investment in physical infrastructure which could have time horizon longer than 10 years will have to go through regular order. I always thought the "bi-partisan" bill is necessary is because of this and the need for Dem high command to placate Manchin.

[jaichind]

https://twitter.com/washingtonpost/status/1426147926888361985


Dumb

The House GOP should offer to make up votes for the bipartisan bill to pass on its own if doing so means the Progressive Dem threatens to sink such a bill. 

[jaichind]

https://twitter.com/washingtonpost/status/1426147926888361985


Dumb

The House GOP should offer to make up votes for the bipartisan bill to pass on its own if doing so means the Progressive Dem threatens to sink such a bill. 

Problem is just that House Republicans in general are much more nuts than Senate Republicans. The fact that even Mitch voted for the bill should convince few, but not that many I guess.

Yes, but its not like the Dem Progressive are that large in numbers either.

[jaichind]

https://www.theedgemarkets.com/article/biden-inheritancetax-plan-poised-be-scaled-back-congress

Biden inheritance-tax plan poised to be scaled back in Congress

[jaichind]

Bloomberg News report that House Democrats Set to Propose Corporate Tax Rate of 26.5%. The top rate on capital gains would rise from 20% to 25% versus 39.6% that Biden wanted.  I assume this is for those with AGI above $1 million.

[jaichind]

It seems the Ways and Means Democrats will propose

1) Top marginal tax rate goes from 37% to 39.6%
2) 3% surtax on individuals with AGI of more than $5 million
3) Top capital gains rate increases to 25% from 20% (Biden wanted 39.6%)
4) Top corporate tax rate rises to 26.5% from 21% (Biden wanted 28%)
5) Increases carried-interest holding period to five years from three

Estimated revenue from corporate tax changes likely to total $900 billion
Estimated revenue boost from high-income individuals ~$1 trillion

It seems this is a bit watered down from Biden's proposals as way to get the support of moderate Dems.  Most likely there will have to be cut some more as part of negations with the Dem moderates.

[jaichind]

Bloomberg report that "Democrats plan `meaningful' change to cap on SALT deduction"

This will not go down well with Dems from rural low tax states.

[jaichind]

Bloomberg report that "Democrats plan `meaningful' change to cap on SALT deduction"

This will not go down well with Dems from rural low tax states.

You would think so, but West Virginia’s Senator has decided to spend all his time fighting capital gains taxes and this was one of the primary demands of his No Labels buddies. So I doubt it.

Ultimately what this is about are Dems from high tax areas are afraid of losing the goose that lays the golden eggs by having high income earners move to low tax areas like FL or TX.  Some Dem progressives are opposed to this move because it gives a tax benefit to high income earners in high tax areas.  The way to have it both ways are to

a) do SALT cap adjustment or abolishment
a) take back the benefit really jack up income tax rates (like more of this 3% surtax on AGI above $5 million)

That way all high income earners across the board will see a tax increase but especially in low tax states like FL or TX.

The problem with this approach is that some Dem moderates will say that this will create an disincentive to work among high income earners.

Will be interesting to see how this plays out.  I personally do not thing the SALT cap reform or abolishment will take place.  It was and always be a pipedream of Dem House members from high income areas in Greater NY and West Coast.

[jaichind]

https://news.bloombergtax.com/daily-tax-report-state/salt-deal-coming-as-soon-as-this-week-democratic-advocate-says

"SALT Deal Coming as Soon as This Week, Democratic Advocate Says"

[jaichind]

https://www.washingtonpost.com/politics/2021/09/28/vulnerable-house-democrats-say-it-really-better-be-infrastructure-week/

Vulnerable House Democrats say it really better be infrastructure week

"House Democrats and their aides representing seats Republicans are targeting in next year's midterms warned the deal must come to the floor and pass on Thursday, whether or not a vote occurs on the $3.5 trillion budget package by then (a very tall order)."

[jaichind]

Of course as a MAGA anti-Dem partisan I want everything to not pass but putting that aside this situation is very interesting from a game theory point of view.  It seems to me the Dem moderates have a clear negations advantage over the Dem progressives.  This is because Biden has not come out strongly and publicall7y saying that unless both the bipartisan and reconciliation bill must pass for his agenda to be successful.   Without that Pelosi and Schumer might have no choice but to try to get something passed and could always borrow GOP votes to overcome Dem progressive defections.  The Dem progressives do not have this option and puts them at a disadvantage.

The game theory calculation from the GOP point of view is also interesting.  I am sure most of them, like me, just want everything to fail and then wait for the 2022 anti-Dem wave.  But lending support to the Dem moderates to get the bipartisan bill passed might increase the divide between Dem moderates and Dem progressives.  There is an argument that it is easier to defeated a divided Dem party that got something done versus a united Dem party that go nothing done in 2022.  Not clear which is better for the GOP but some in the GOP might take the former option and have the talking point of "hey, we did help get something passed."

[jaichind]

The market did drop almost 1% since 11:30AM.  Part of that is of course end of quarter selling but the current situation with the infrastructure bill must be playing a role.

[jaichind]

Trillion dollar coin is not the only way around the debt ceiling.  Back in 2013 I wrote about another idea I came up with to get around it

There is a easy way out of the debt ceiling since we are talking about Treasury bonds.  Just issue Treasury bonds with face value of 100 but with coupon payments of say, 25 cents on the dollar.  Such a bond will sell at a premium (above the face value of 100) so the yield will be what the market will accept.  But the debt ceiling calculations are based on the face value since that will be the payout at the end of the bond.  In other words, as bonds with face value of 100 and coupon of 3 expires, just issue another bond of 100 with a coupon of 25 for a price around 300.  So now you can borrow an extra 200 versus before but have same "debt."  I thought of this one based on what I know Greece did in order to keep its "debt" below EU limits but in reality borrow more than that.  Of course the duration of such a bond might be such so that buyers might not want to buy it but other variations of this can be done to get the market what it wants.

[jaichind]

https://www.foxnews.com/politics/sinema-confronted-by-immigration-activists-in-a-bathroom.amp

"Sinema confronted by immigration activists in a bathroom"

Sounds like a great way to get her to change her vote

[jaichind]

One thing that is not clear to me is: The Progressive seems to indicate that they (including Sinema  and Manchin) all made a deal that the bipartisan bill and reconciliation bill should move together.  But Sinema  and Manchin seems to indicate that it makes no sense to link the two.  So what is the truth. Was there a deal or not?

[jaichind]

Apparently Progressives are offering to cut the length of the programs from 10 years to 5.

https://www.post-gazette.com/news/politics-nation/2021/10/04/Progressives-offer-to-scale-back-spending-to-advance-Biden-s-agenda/stories/202110040051

"House progressives looking for ways to rescue President Joe Biden’s stalled domestic agenda opened the door to scaling back some of the more ambitious social spending by having those programs expire rather than be permanent.

“One of the ideas out there is to fully fund what we can fully fund, but instead of funding it for 10 years, fund it for five years,” said Rep. Alexandria Ocasio-Cortez, a New York Democrat and leading progressive voice, on CBS’s “Face the Nation.”

Democrats are looking for ways out of their deadlock three days after House Speaker Nancy Pelosi scuttled a planned vote on a $550 billion infrastructure package. She retreated as progressives balked at a stand-alone bill without the $3.5 trillion social safety-net spending and tax increases they want.

Progressives say they’re willing to compromise on that number — within limits. The chairwoman of the Congressional Progressive Caucus flatly rejected Sen. Joe Manchin’s offer of $1.5 trillion in social spending."

That sounds like an accounting trick taking advantage of the 10 year time period of the reconciliation process.  Why not have everything start at the 9th year to lower the cost even more.  BTW, I totally agree that 2017 Trump tax cut used similar tricks.

[jaichind]

https://www.bloomberg.com/news/articles/2021-10-04/salt-cap-relief-faces-rollback-as-democrats-eye-less-spending

SALT-Cap Relief Faces Rollback as Democrats Eye Less Spending

[jaichind]

Biden just said there are not the votes for tax hikes.  Excellent.

[jaichind]

 https://www.bloombergquint.com/politics/sinema-agrees-to-broad-tax-hike-outline-to-fund-biden-agenda

"Sinema Agrees to Broad Tax Hike Outline to Fund Biden Agenda"

I suspect Biden is talking about "no vote for tax rate hikes" is

The possible breakthrough comes after a day of discussions among Democratic leaders and Sinema and her staff over the tax policy goals for the bill. Sinema had previously said that she would likely not support increases to corporate and individual tax rates, prompting Democrats to look at alternative tax options to increase revenue without upping the headline rates.  Democrats are considering options including an excise tax on stock buybacks, a levy on the unrealized gains of billionaires and corporate minimum taxes as a fallback on tax rate hikes. However, those ideas have yet to be fully developed and could face political resistance from other Democrats.

Where tax rate increases are out due to Sinema but I guess they got her to agree to tax on stock buybacks or corp min tax.  I can even see some GOP house and Senate members backing copr min tax.

[jaichind]

It's utterly mindboggling why Sinema won't raise a single cent on corporations.

While I am pleased that Sinema has taken a position that I support I am confused by this.  From a game theory point of view, it does not make sense for her to take this position.  Manchin's positions and behavior are consistent with what he has said and what is likely best for his long-term political interests.    This does not seem to be true for Sinema.  I assume she will a) not run for re-election in 2024 or b) join GOP in 2024 and hope to win the GOP primary.  If a) or b) are true then her behavior is a lot easier to explain.

[jaichind]

I feel the apparent failure to pass the Build Back Better plan is kind of similar to Trump's failure to repeal Obamacare in 2017. Both were more or less signature promises POTUS wanted to done in the 1st years, but a narrow senate majority prevents it from happening. Both cause severe outrage at the base and leaves POTUS with declining approval ratings.

Only difference is that Obamacare repeal failed due to the GOP's lack of a real alternative (something they have failed to come up with ever since the ACA was passed) while BBB only fails due to 2 stubborn senators with an out of time and out of touch mindset.

I was about to write the same thing.  But cannot I claim that the 2017 GOP effort to repeal Obamacare was defeated by a renegade within its own ranks (McCain) just like the BBB failure (relatively) was also due to Dem renegades.   In both cases what seems like fairly unpopular structures ended up going on for a while.  With the Red wave in 2022, it will be a decade before the Dems have a chance to alter the Trump 2017 tax structure just like it seems unlikely the GOP will be able to get rid of key parts of Obamacare going forward.

[jaichind]

Richard Neal said a proposal to tax the assets of billionaires has been dropped.  The latest idea is a 3% surtax on incomes above $10 million.

[jaichind]

Summery of plan
A 15% minimum tax on corporate profits for firms with earnings over $1 billion reported to shareholders, and a 1% surtax on stock buybacks

An additional 5% tax on incomes above $10 million, as well as an additional 3% on incomes above $25 million

$555 billion in clean energy and climate provisions

Universal, free preschool for three- and four-year olds, and an extension of the child tax credit through 2022

[jaichind]

Bloomberg News reports that "SALT-Break Expansion Seen Likely Despite Omission in Biden Plan" based on what Dem lawmakers are telling Bloomberg News.  I am skepitcal.

[jaichind]

I still think what is best for the GOP is for a bunch of House GOP members to approach Pelosi to say that they will make up the vote Progressive vote she will lose on BIF.