The deal represents a retreat for Manchin, who suggested in 2010 that he opposed changing tax rates in times of recession.
The deal represents a retreat for Manchin, who suggested in 2010 that he opposed changing tax rates in times of recession.
L ast week, it appeared that West Virginia senator Joe Manchin’s negotiations with Senate majority leader Chuck Schumer had whittled down the Democrats’ last party-line spending bill of 2022 to a three-year extension of enhanced Obamacare subsidies and a proposal to allow Medicare to fix prices for prescription drugs.
Then, on Wednesday, Manchin made a surprise announcement: He and Schumer had reached an agreement on a bigger deal, which in addition to Obamacare-subsidy extension and the Medicare price fixing, would allocate $369 billion to be spent on “energy security and climate change.”
Democrats say this bigger bill, which has yet to receive an official score from the Congressional Budget Office (CBO), would raise $313 billion in tax revenue through a 15 percent corporate minimum tax, $124 billion through doubling the size of the IRS’s budget so as to allow the agency to ramp up enforcement efforts, and $14 billion through ending the “carried-interest loophole.”
The Medicare price-fixing proposal would save the federal government another estimated $288 billion, but as a recent National Review editorial pointed out, “roughly 90 percent of the $288 billion in Medicare savings wouldn’t come until fiscal year 2027 or later, according to the CBO.”
Senate Republicans were quick to hit Democrats for hiking taxes in the midst of a recession. “Minutes ago, new data confirmed what a supermajority of Americans already knew: Democrats have plunged America into a recession. According to official statistics, the U.S. economy just shrank for the second consecutive quarter,” Senate minority leader Mitch McConnell said in remarks on the Senate floor on Thursday. “Apparently, our Democratic colleagues do not want to be responsible for just skyrocketing prices alone: They want Americans to be faced with skyrocketing prices and higher taxes and fewer jobs, all at the same time.”
In a press conference conducted over Zoom on Thursday, Manchin defended the 15 percent corporate minimum tax as a matter of fairness. “If someone’s upset [because] they weren’t paying anything [before], please come forward and tell us why you were able to have this great country protect you and give you these opportunities and you don’t have to pay anything into it. That’s the only tax that we really changed.”
“There’s no tax increases [in the reconciliation bill], except the 15 percent minimum [tax],” he added. “I don’t know how anyone could be opposed when we think [corporations] should be paying 21 percent.”
He was not asked whether he’d changed his mind about the wisdom of raising taxes in a recession since his 2010 Senate campaign, when during a debate he said, “I don’t think during a time of recession you mess with any of the taxes, or increase any taxes.”
In fact, Manchin appears to have retreated from more than one of his previous positions in order to reach an agreement with Schumer now. Back in the fall of 2021, one of Manchin’s big problems with the Democrats’ “Build Back Better” bill was that many of the spending programs in it ended after a few years. Manchin derided those cutoffs as “budget gimmicks” and “shell games” that hid the true cost of the bill. Yet the Obamacare subsidies in the Manchin–Schumer “Inflation Reduction Act” are only extended until 2025.
While it remains to be seen whether Arizona Democratic senator Kyrsten Sinema will reject the tax hikes in the midst of a recession and whether the Senate parliamentarian rules that any of the provisions in the bill run afoul of the chamber’s complex budget-reconciliation rules, the Manchin–Schumer agreement is very likely to pass on a party-line vote next week. And though it’s much smaller than the $4 trillion package Democrats wanted last year, it will still represent hundreds of billions of new spending in its own right.