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Exclusive: How Democrats plan to overhaul taxes, climate spending, and health care before the midterms – TalkOfNews.com

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How Democrats plan to overhaul taxes, climate spending, and health care before the midterms

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After months of back and forth, Sen. Joe Manchin (D-WV) has finally found a version of Build Back Better that he actually likes. Now the question for Democrats is whether they can hold their caucus together to quickly pass it.

On Wednesday, Manchin put out a statement in support of a new compromise, the Inflation Reduction Act of 2022, which addresses everything from prescription drug costs to corporate taxes to the climate. The new bill, which Democrats released a one-page fact sheet for, contains significantly less than what the party previously pushed for in Build Back Better but is far more expansive than the reconciliation package Manchin signed on to a few weeks ago.

As of earlier this month, Manchin was only on board for a bill that would lower prescription drug costs and extend ACA subsidies. He’d argued that doing anything more would increase inflation and hurt the economy. Now, Manchin says, he has found a way to decrease inflation (whether that’s correct is unclear) and advance Democrats’ legislative agenda.

What’s in the Inflation Reduction Act of 2022

The latest compromise includes the previously agreed-upon health care provisions as well as a 15 percent corporate minimum tax, a proposal to close the carried interest tax loophole, and a provision for IRS enforcement. Additionally, it contains historic spending for climate, though it’s on a smaller scale than what the House envisioned last year.

All told, Democrats estimate the bill will bring in $739 billion in revenue and will invest $433 billion in spending. It also addresses Manchin’s goal of reducing the deficit and would do so by $300 billion or more. The bill’s investment in areas like clean energy, tax credits, and reducing health care costs is notable, though it’s much less ambitious than the provisions in the $1.75 trillion bill that the House passed last year.

Manchin made his announcement shortly after the CHIPS+ bill passed the Senate with bipartisan support. Previously, Senate Minority Leader Mitch McConnell had threatened to hold that bill hostage if Democrats pursued reconciliation. After CHIPS+ was approved, however, Democrats appeared freer to make progress and put forth this deal.

Here are the key provisions the legislation contains:

Taxes

  • Sets a new corporate minimum tax of 15 percent: Although corporations technically have a tax rate of 21 percent, many use loopholes to pay much less. This bill sets a hard 15 percent corporate minimum tax rate for companies that are bringing in more than $1 billion in profits each year, and is estimated to raise $313 billion in revenue as a result.
  • IRS enforcement: The US loses an estimated $1 trillion a year due to fraudulent tax returns and dubious accounting. The legislation would invest millions into the IRS to help the agency track down these funds; that money, along with other spending on the agency, is expected to bring in $124 billion.
  • Closes the carried interest tax loophole: The carried interest loophole enables money managers, like hedge fund managers, to pay a lower tax rate (20 percent) on compensation they get from overseeing and investing clients’ funds. This bill would close that loophole and require managers to pay a tax rate of up to 37 percent — the top rate for standard wages — on that compensation. If implemented, it could bring in $14 billion in revenue.

Health care

  • Allows Medicare to negotiate prescription drug prices: Currently, Medicare is unable to negotiate prices for prescription drugs, so the cost is set by the manufacturer. Beginning in 2023, this bill enables Medicare to negotiate on 10 drugs in the first year. These negotiations could help reduce costs for people who use these drugs and are estimated to generate $288 billion in revenue because of the savings for Medicare.
  • Extends ACA subsidies for three years: In the American Rescue Plan, lawmakers approved subsidies that would lower insurance premium costs for millions of people covered by the Affordable Care Act. Those subsidies are poised to sunset at end of this year, and this bill would extend them for three years through 2025. This provision is expected to cost $64 billion.

Climate

  • Clean energy tax credits: There are big investments in a wide range of tax credits, including ones that aim to make homes more energy-efficient, incentivize clean energy vehicles purchases, and spur the use of clean sources of electricity and energy storage.
  • Industry and manufacturing: The bill also has significant funding aimed at curbing existing pollution from manufacturing, and pushing for the establishment of more manufacturing facilities in the US that help to produce clean energy products like solar panels and electric cars.
  • Environmental justice: Billions of dollars are set aside for grants dedicated specifically to places that have experienced outsize pollution, with the goal of helping these areas combat public health risks. Some of these funds are also allocated to tackle the negative impacts of transportation infrastructure, and other public projects, on communities.

What’s next for the bill

Democrats have long planned to use the budget reconciliation process in order to pass many of these provisions, since that process allows them to move policy forward with just 51 votes and no Republican support. This week, Schumer announced that the party intends to vote on this bill next week and pass it before leaving for recess on August 5.

Whether that timeline is realistic remains to be seen. The legislation has been submitted to the Senate parliamentarian, a procedural expert who will advise on whether the provisions address taxing and spending enough to qualify for budget reconciliation; it will take her some time to review the package. If the parliamentarian gives the green light, Democrats will be able to vote and pass the bill, which would then head over to the House. If she does not, the party will likely the alter the bill.

There are some other outstanding questions as well. Thus far, Sen. Kyrsten Sinema (D-AZ), who previously took issue with certain corporate tax increases in Build Back Better, has yet to say if she will support the Inflation Reduction Act. Similarly, it’s not yet clear what support in the House will look like, specifically from a contingent of moderate Democrats who had demanded the bill bring back the state and local tax deduction, also known as SALT.

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Further complicating things is a surge in Covid-19 cases including among Senate Democrats, who will need every vote they have to pass any reconciliation bill. Thursday, Sen. Dick Durbin (D-IL) announced he tested positive for Covid-19, after Manchin announced the same earlier this week. Both will likely be back in time to participate in a vote if it happens next week, though any additional cases could add to the uncertainty.

All these factors mean the immediate passage of the bill could be in jeopardy unless lawmakers agree to stay in town for longer than originally planned.

Update, July 28, 2:30 pm: This story has been updated to include new information on the contents of the Inflation Reduction Act.


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Exclusive: Fed to Weigh Higher Rates Next Year – TalkOfNews.com

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FDA Authorizes Updated Covid Booster Shots

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Wall Street Journal: “A smaller 0.5-point increase would mark a new phase of policy tightening as they calibrate how much higher to lift rates. Policy makers expect price pressures to ease meaningfully next year, but brisk wage growth or higher inflation in labor-intensive service sectors of the economy could lead more of them to support raising their benchmark rate next year above the 5% currently anticipated by investors.”

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Exclusive: Rachel Maddow Raises An Interesting Question About Anti-LGBTQ Extremists And Infrastructure Sabotage – TalkOfNews.com

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Rachel Maddow talks about the power grid attack in Moore, County, NC.

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Rachel Maddow pointed out that the same weekend that white nationalist groups were protesting against LGBTQ events someone shot up a power station in the county where one of the events was taking place.

Video:

Maddow said:

So when Moore County, North Carolina, was host this Saturday to another one of these far right anti-gay, anti-trans protests and then just as a local drag show that they were protesting started up, someone shot up the power stations and cut power to the whole county.

Yes, understandably people locally immediately started asking the sheriff if that was the reason why, if there was a connection. Now, the sheriff has said repeatedly that he has no idea if the attack on the power stations is linked to those anti-gay, anti-trans protests. There really is no indication either way. The sheriff says he has no idea about a motive of any kind. No suspects, nobody claiming any responsibility, no one in custody.

Someone has committed at best an act of sabotage against the power supply. At worst, it was an act of domestic terror.

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It is not a coincidence that on the same weekend that anti-government extremists and neo-nazis show up to protest in a North Carolina county, the power grid gets shot up.

Rachel Maddow didn’t say that it was the extremists who shot up the power grid because there is no evidence to suggest either way, but the power grid wasn’t shot up before the right-wing extremists showed up, and then it was.

Right-wing threats did not stop after 1/6. In fact, the situation has gotten worse, and at a time when there is a lot going on, this problem is worth monitoring.


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Exclusive: Inside the fight for an end-of-year deal on the child tax credit – TalkOfNews.com

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Inside the fight for an end-of-year deal on the child tax credit

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In 2021, an expansion of the child tax credit delivered hundreds of dollars monthly to some 35 million parents across the United States, helping them afford gas, food, and school expenses, and lifting almost 3 million children out of poverty. But last December, Democrats narrowly failed to approve an extension of the expanded credit, and it expired.

Now, with only a few weeks remaining before a new Congress takes office, advocates for the child tax credit are trying again to get an expansion included in any end-of-year tax package.

It’s a tall order, especially because Democrats would need at least 10 Senate Republicans to agree to pass any broad deal; last year, even a simple Democratic majority proved out of reach. But Democrats believe the political dynamics have since changed in their favor, and so have their policy demands, making a compromise potentially easier for Republican moderates to stomach.

The sticking point since the expanded credit expired has been Republicans and West Virginia Democratic Sen. Joe Manchin’s resistance to the idea that a more generous child tax credit should go to families where no parents are working. 2021 marked the only time in its quarter-century history that the CTC had no parental work requirement, and it was that feature, experts agree, that drove the policy’s substantial reduction in child poverty: a stunning 46 percent drop in one year, according to US Census data. Until the Inflation Reduction Act passed in August, Democrats and their allies were unwilling to entertain any child tax credit expansion that maintained a connection to work.

Now, though, Democrats are signaling they’d embrace a more modest expansion — ideally one that keeps the credit fully available for all families, but at least makes it easier for parents with little to no earnings to access, even if at a reduced rate. Whether lawmakers can increase the amount of funding available for parents of infants and toddlers, as opposed to all kids under 18, is another option on the table.

The biggest negotiating card Democrats have right now is certain expiring business tax breaks. Since 1974, companies have been allowed to deduct research and development (R&D) spending the same year they make the investments, but as a budget gimmick included in the 2017 Tax Cuts and Jobs Act, businesses, as of 2022, now must expense those costs over five or 15 years instead. Restoring the right to annually deduct R&D spending is a top legislative priority of the business community.

Advocates are hoping to pair any restoration of R&D tax breaks with an extension of the child tax credit. In November, Democratic Sen. Ron Wyden, who chairs the Senate finance committee, declared his intent to push for both together while Democrats still control both chambers of Congress.

Democratic Sen. Sherrod Brown, chair of the Senate banking committee, has stated that expanding the CTC is his top priority. “I’ll put it this way, no more tax breaks for big corporations and the wealthy unless the child tax credit’s with it. I’ll lay down in front of a bulldozer on that one,” he said in September.

Additional aid for Ukraine, public health, and disaster relief are the Biden administration’s top priorities for any end-of-year deal, but in late November, Karine Jean-Pierre, the White House press secretary, said that if corporate tax breaks are included in a final deal, tax cuts “for working families” should be as well.

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The negotiations ultimately may turn on just how much corporate lobbying pressure Republican lawmakers face. Prior to the midterms, Republicans anticipated much bigger electoral gains, making compromise with Democrats ahead of the new Congress seem less urgent. But now, with Democrats set to retain Senate control and Republican House margins tighter than expected, the expectation that Republicans would even be able to reach a deal on the business tax breaks next year if they wanted to looks dicey.

This reality, in fact, partly explains why Senate Republican leader Mitch McConnell announced last week that he’d like to negotiate an omnibus tax package in December, rather than a temporary spending deal that prevents a government shutdown but kicks the can on serious legislative decisions. Pushing the tax negotiations to 2023 would mean incoming House Speaker Kevin McCarthy, rather than current Speaker Nancy Pelosi, would be tasked with getting an acceptable deal through his chamber. “Nobody trusts McCarthy to pass anything (not even McCarthy),” quipped Politico in late November.

Though some advocates are still publicly calling for the expanded CTC of 2021, most acknowledge they’d accept more modest improvements

The 2021 expansion of the child tax credit, passed as part of President Joe Biden’s pandemic relief program, sent thousands of dollars to parents across the US. It made non-working and poor families fully eligible for the credit’s full value and increased the value of the subsidy itself — up to $3,600 per child.

Democrats had been optimistic that if they could just seed the generous program through the American Rescue Plan, then they would amass the kind of political support that makes a popular subsidy hard to repeal. But they failed, and the CTC is resultantly back to its pre-Covid form, with a maximum of $2,000 per child for working families only — and will remain there unless lawmakers change it.

Democratic Sen. Joe Manchin and Republicans believe it’s important for the child tax credit to maintain a connection to working parents.
Kevin Dietsch/Getty Images

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At the heart of ongoing debates over the CTC are unsettled questions about what the policy is for. Is it to reduce childhood poverty? Is it to incentivize parents to work? Is it to help all kids?

Some Democratic lawmakers and CTC activists have been publicly calling for a reinstatement of the 2021 child tax credit, pointing to the research showing it helped families, reduced child poverty, and did not deter parents from working.

In late October, dozens of centrist Democratic lawmakers sent a letter to House leadership calling for an extension of the CTC passed under the American Rescue Plan. Theirs was followed by a similar letter, making the same ask, signed by dozens of progressive Democratic lawmakers. Another letter in November signed by over 550 hunger groups likewise called on congressional leadership to reinstate the child tax credit from 2021.

Adam Ruben, the director of Economic Security Project Action, a group organizing for the CTC, told me that advocates both in Congress and outside Capitol Hill are “crystal clear and aligned” in calling for the child tax credit that passed the House as part of their Build Back Better package, which mirrored the American Rescue Plan version. “That’s the version that’s most effective at reducing poverty, most effective at helping families with the high cost of gas and groceries,” he said.

Yet privately, most child tax credit champions admit they’d accept something less generous than the American Rescue Plan version, and in lobbying meetings they aren’t pressing lawmakers to hold the line, as they did during the reconciliation process. Even some lawmakers and advocates are saying this now publicly.

One option to expand the credit is to focus on the 19 million children under age 17 who currently receive less than the full $2,000, either because their parents earn too little to qualify or because they aren’t working at all. (These children are disproportionately Black, Latino, American Indian, or Alaska Native.)

Expanding the credit for those 19 million children — or, as policymakers say, making the credit “fully refundable” — would cost about $12 billion per year. But it’s not really the cost, advocates acknowledge, that’s the barrier to doing that. It’s that Manchin and Republicans believe it’s important for the credit to maintain some connection to working parents.

As a compromise, Democratic aides say they’re hoping they could make the credit at least fully refundable for parents of young children, or lower the amount parents need to earn to qualify for the credit’s full value.

“I have always believed that in the end this would be bipartisan, that it wouldn’t be just the way I had designed it, that the Republicans would make some changes to it,” Democratic Sen. Michael Bennet said recently on a Politico podcast.

Elyssa Schmier, a lobbyist with MomsRising, told me that while their long-term goal is to see a permanent extension of the child tax credit passed under the American Rescue Plan, what they’re hoping to see in a lame-duck deal “is first and foremost the inclusion of the child tax credit” and in a form that helps it reach as many families in need as possible. Schmier said their focus is not on increasing the value of the credit right now, but expanding it for low-income families currently barred by work requirements.

Rev. Jim Wallis, another child tax credit advocate who leads the Georgetown University Center on Faith and Justice, said he’s not expecting lawmakers to approve a permanent end to all work requirements in December, and said advocates are pushing for some kind of “expansion” targeted specifically to the poorest and most vulnerable families.

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Most liberal activists right now agree with Schmier and Wallis that focusing on the credit’s anti-poverty potential is the most important piece. Other coalition letters have been careful to exclude mention of the 2021 child tax credit, so as to not imply they’re demanding the same policy they were calling for earlier this year. One congressional letter sent by five national civil rights organizations simply called to “expand the CTC,” as did another sent by a coalition of Christian churches and ministries.

The money elephant in the room

One reason many Democrats are trying to minimize discussion of the 2021 expanded child tax credit now is because it — and the version Democrats passed in their subsequent House Build Back Better package — is very expensive, with a price tag exceeding more than $100 billion per year.

In comparison, the corporate tax breaks with which advocates are hoping to pair a child tax credit expansion come at a lower cost. Estimates vary, but the ballpark figure floating around the Senate is somewhere between $45 billion and $60 billion per year. The Committee for a Responsible Federal Budget has estimated that a permanent R&D fix would cost roughly $155 billion over the next 10 years.

Senate Minority Leader Mitch McConnell has insisted that any end-of-year tax deal must prioritize defense spending over domestic policies like the child tax credit.
J. Scott Applewhite/AP

“I love the CTC, but I think advocates have done a terrible job of acting like it costs peanuts,” said one Democratic aide working on the negotiations. “It gets you nowhere to pretend we can do this massive transformational thing for nothing. Like expectations here have just been so out of whack because none of the advocates would admit this massive expansion of child benefits costs a lot of money.”

Rather than focus on comparing dollar amounts between the child tax credit and the business tax breaks, CTC advocates have stressed lawmakers should focus instead on parity of time for benefits. In other words, if Congress extends R&D tax breaks for another two years, then they should extend the child tax credit in some form for two years, too. A spokesperson for the Chamber of Commerce declined to comment.

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For now, Democratic aides say they’re waiting to hear more details from Senate leadership over how much money is on the table to work with at all. McConnell has previously insisted that any end-of-year tax deal must prioritize defense spending over domestic policies, given that Democrats have already passed major domestic policy bills this year, though Senate Majority Leader Chuck Schumer said he intends to fight this.

One crucial factor, according to Senate aides, will be if Republicans feel like they’re getting a fair trade — something that can be measured in terms of dollar amount, length of time, or even, frankly, just “vibes.” When House lawmakers first sent their letters in late October and early November calling for a reinstatement of the 2021 expanded CTC in exchange for business tax breaks, some Republican staffers felt Democrats were not making a serious offer, given that many Democrats also want the R&D credits extended. In other words, since Democrats weren’t coming out of the gate with any proposed cuts to their own priorities, it didn’t seem like a great deal to Republicans, or even a realistic threat.

Democratic aides I spoke with said the threat to vote against R&D tax breaks if not paired with the child tax credit is no bluff, and pointed to the fact that Democrats have stood resolved against approving the business tax breaks to this point despite intense lobbying pressure. “If the number of Democrats willing to support the Young-Hassan bill were compelling then this would have been passed by now,” one aide said, referring to a bill Sens. Todd Young (R-IN) and Maggie Hassan (D-NH) have tried to include in multiple legislative vehicles this past year.

Sam Hammond, the director of social policy at the Niskanen Center, a centrist think tank, thinks the chances of reaching a deal on the child tax credit this month are relatively slim, though he believes the results of the midterms increased its odds. “Even though Democrats lost the House, just having control of the Senate floor is, like, nine-tenths of the battle over what can be put on the floor and up for a vote,” he said. “I think if Republicans had swept, there wouldn’t be a tax package being discussed at all.”

Where are Republicans on this?

Conservatives opposed to expanding the child tax credit are sensing that a legislative deal might not be far-fetched, and have started to ramp up their opposition.

The Wall Street Journal ran an op-ed and an editorial against the CTC in late November, perhaps the clearest indication they recognize it’s time to fight. “The tax credit is a parable about good intentions, unintended consequences, and the insatiable entitlement state,” the Journal argued, citing new studies that estimate a permanent extension of the American Rescue Plan child tax credit would reduce economic output by 0.2 percent over a decade, and lead to 1.5 million people leaving the workforce.

In June, Republican Sens. Mitt Romney (UT), Richard Burr (NC), and Steve Daines (MT) introduced a new bill — the Family Security Act 2.0 — to distribute monthly cash payments to parents. The proposal is a modified version of a child allowance policy Romney introduced in 2021, though his new bill includes a requirement that families earn at least $10,000 to receive its full benefit.

The Republican proposal would mark a big expansion from the current child tax credit. It would increase the maximum value from $2,000 to $4,200 for each child under age 6 and $3,000 for each child ages 6 through 17, paid out in monthly installments.

Romney’s office declined to comment for this story, but the Utah senator told Semafor “it’s probably not going to be until next year that we consider new legislation” on the CTC.

Most other Republicans, though, are being more tight-lipped, and Ruben, of the Economic Security Project, says his conversations with Republicans suggest they’re keeping their negotiating options open for now.

“We’re talking to Republican offices that say they want to do more for families than current law provides, and when we say, ‘What’s your bottom line in terms of what you can or can’t accept?’ they say, ‘Well, I don’t know, it’s a deal,’” Ruben said. “They don’t say, ‘It has to absolutely do this,’ or has to be written in a certain way. It’s all more fluid in Congress right now than that.”

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