Jul 12, 2022 - Politics & Policy

House centrists mull Manchin counteroffer: No new taxes

Sen. Joe Manchin (D-W.Va.) and Rep. Josh Gottheimer (D-N.J.) look at one another at an event on Capitol Hill.

Joe Manchin (left) and Josh Gottheimer. Photo: Bill Clark/CQ-Roll Call via Getty Images

Rep. Josh Gottheimer (D-N.J.) is gauging support among House centrists for a counteroffer to the emerging Senate reconciliation package, with one big clause: No new taxes.

Why it matters: Any attempt to modify a deal that Senate Majority Leader Chuck Schumer may reach with Sen. Joe Manchin (D-W.Va.) could scuttle the entire package. That could deprive President Biden — and vulnerable lawmakers — of a pre-election win at a time of real weakness.

  • Gottheimer's discussions target a small group that includes Reps. Carolyn Bourdeaux (D-Ga.), Ed Case (D-Hawaii), Tom Suozzi (D-N.Y.), Susie Lee (D-Nev.) Dean Phillips (D-Minn.) and Mikie Sherrill (D-N.J.).

The big picture: Manchin has been adamant he wants higher taxes on corporations to bring down the deficit and help fight inflation.

  • For months, his shorthand has been a 2:1 ratio of fresh revenues to new spending, with some $500 billion going to deficit reduction.
  • But early House discussions led by Gottheimer don't envision any new taxes on corporations or wealthy individuals. The Trump tax cuts on corporations and individuals would remain in place.
  • Gottheimer's formula would leave $177 billion for deficit reduction — a step toward Manchin but a long way from his roughly $500 billion target.

Be smart: Like an aircraft carrier in high seas, the runway for President Biden, Schumer and House Speaker Nancy Pelosi to land a reconciliation package is short and moving.

  • After declaring Biden’s original $2.2 trillion social spending and climate package dead last December, Manchin revived talks with Schumer on a much smaller deal this spring, and the two sides are continuing their negotiations.
  • But Manchin remains concerned about inflation. Fresh data — as the White House braces for a potential 8.8% annual CPI rate — could change his calculus.
  • Some House centrists are equally concerned that the economy is on the verge of a recession and worry about raising taxes in a slowdown.

Sen. Kyrsten Sinema (D-Ariz.), who scotched plans to increase the overall top corporate tax rate last year, would need to see the details of any deal Schumer and Manchin reach.

  • She did support a variety of revenue options, which added up to $1.8 trillion in new taxes, to address tax avoidance by corporations and wealthy individuals.

There have long been questions about how Democratic leaders and the White House could finesse the House's "No SALT, No Deal" caucus in the House.

  • With Democrats currently sitting on a 220-210 margin in the House, Gottheimer would need five votes to extract concessions from the Senate or House leaders.

By the numbers: Gottheimer's counteroffer envisions $520 billion in new spending for climate energy and health insurance exchanges, and a total of $627 billion in new money from enhanced IRS enforcement and drug pricing reform.

  • Some $400 billion would come from IRS provisions, relying on the White House’s rosy assessment of how much revenue they can raise by cracking down on tax cheats.
  • He’s counting on another $297 billion from prescription drug reform.
  • While he wants to lift the $10,000 deduction cap for state and local taxes (SALT) on federal taxes, his version — which includes income limits — is deficit-neutral.

Flashback: Gottheimer led a group of nine centrist lawmakers last summer to pressure Pelosi to pass the bipartisan infrastructure bill first and then turn to Biden’s bigger social spending and climate package.

  • While the move irritated House leaders, the group ultimately prevailed and Biden signed some $1 trillion in infrastructure spending into law.

The bottom line: Gottheimer’s move is an indication that some House members are taking the Schumer-Manchin talks seriously.

  • But just because they're preparing to respond to a potential deal doesn’t guarantee an agreement.
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