Democrats Negotiate Tax, Healthcare Provisions as Biden Seeks Deal This Week

WASHINGTON—Democrats are sprinting to wrap up negotiations over their social-spending and climate bill, hoping by this weekend to resolve disagreements on issues including tax policy and healthcare.

Senate Majority Leader Chuck Schumer (D., N.Y.) said Monday there were three to four open issues. Lawmakers and aides said major policy areas, including the tax increases to pay for the package, Medicare and Medicaid provisions and a paid leave program, remain unresolved. The bill, initially drafted at $3.5 trillion, is now expected to cost between $1.5 trillion and $2 trillion.

Top Democrats want to secure an agreement this week to score a win on climate legislation before President Biden heads to a meeting of Group of 20 leaders in Rome this weekend and a climate summit in Glasgow, Scotland, next week.

Mr. Biden, speaking to reporters before departing Delaware for an event in New Jersey, said he was hopeful for an agreement before leaving Thursday for Europe. “It’d be very positive to get it done before the trip,” he said.

White House spokeswoman Karine Jean-Pierre added: “We’re continuing to negotiate. We’re almost there.”

A deal also would help move a stalled, $1 trillion bipartisan infrastructure package across the finish line. Democrats want to pass the infrastructure package this week to provide new funding and reauthorize existing transportation programs set to lapse on Oct. 31. Progressive Democrats have said they would block the public-works bill until the party first rallies around a social-spending and climate bill.

Sen. Kyrsten Sinema (D., Ariz.) has signaled her opposition to raising a range of tax rates, adding to the complexity of the Democrats’ talks on their spending bills.

Photo: Anna Moneymaker/Getty Images

At a speech at a train maintenance complex near Newark, N.J., touting his agenda, Mr. Biden was joined by Democratic Gov. Phil Murphy, who is running for a second term and eager to show action on infrastructure spending ahead of Election Day next week.

Several policy areas in the social-spending legislation remain unresolved. Democratic aides said it was possible that lawmakers would drop a proposal to offer paid leave from the package entirely; Democrats already have cut a proposed 12 weeks of leave to four weeks.

Sen. Joe Manchin (D., W.Va.), a critical centrist in the talks, said on Monday that he still had concerns about two of the legislation’s biggest healthcare provisions: expanding Medicare to cover dental, hearing, and vision care; and filling a gap in healthcare coverage in states that haven’t expanded Medicaid.

Mr. Manchin said he was concerned that expanding Medicare coverage would put too much pressure on the program’s finances. “You’ve got to stabilize that first before you look at basically expansion,” he said. “So if we’re not being fiscally responsible that’s really concerning.”

Mr. Manchin also raised concerns about the federal government paying for new coverage in states that haven’t expanded Medicaid, although he noted that the Affordable Care Act intended for all states to do so.

The ACA covers 90% of a state’s cost of expanding Medicaid, and Congress passed Covid-19 rescue legislation this year that provided a temporary increase in federal matching funds for Medicaid for states that hadn’t yet expanded the program.

“The problem that I have with that right now is we’re paying 90-10, so 10% is being paid by all the states, for states that held out and being rewarded 100% is not fair,” Mr. Manchin said.

In states that didn’t expand Medicaid, the proposal under consideration would make people without health coverage eligible for expanded ACA subsidies for several years.

Also uncertain is the fate of a proposal allowing Medicare to negotiate prescription-drug prices. Lawmakers have said they expect a narrower proposal than what House Democrats initially proposed, which would have allowed Medicare to directly negotiate with drugmakers and impose penalties if no price can be agreed upon.

Democrats have been looking to find new ways to pay for the package’s spending after centrist Sen. Kyrsten Sinema (D., Ariz.) signaled her opposition to increasing marginal tax rates on corporations, capital gains or individuals. With unified Republican opposition to their spending and tax plans, Democrats can’t afford to lose a single vote in the 50-50 Senate and can lose only three in the House.

One leading idea is an annual tax on billionaires’ unrealized capital gains. The proposal under consideration from Senate Finance Committee Chairman Ron Wyden (D., Ore.) would impose an annual tax on unrealized capital gains on liquid assets held by billionaires.

People with $1 billion in assets or $100 million in income for three consecutive years would have to pay the tax, according to a person familiar with the discussions. Ms. Sinema has indicated that she is open to that idea and a minimum tax on the income corporations publicly report on their financial statements, according to people familiar with the matter.

Mr. Manchin said on Monday that he could support the new tax on billionaires’ assets and a minimum corporate tax. “I support basically everyone paying their fair share of taxes, how you get to it, you know, we all have a different approach to that as far as taxation,” he said.

Sen. Joe Manchin (D., W.Va.) is a critical centrist vote in the negotiations over the Democratic spending bills.


But the tax on billionaires’ unrealized gains faces hurdles. Mr. Wyden and his staff have been working on the idea for two years but they haven’t released legislative text yet, and some Democrats are skeptical of the provision.

The proposal is expected to have measures dealing with enforcement, unrealized losses and the tricky administrative challenge of valuing illiquid assets such as closely held businesses and artwork. And it is likely to encounter legal challenges over whether it fits within the 16th Amendment’s definition of an income tax.

Still, House Speaker Nancy Pelosi (D., Calif.) said Sunday that she expected the tax on billionaires’ assets would be in the final agreement. She said it would likely generate somewhere between $200 billion and $250 billion in revenue over 10 years but that Democrats would be able to find other ways to pay for the bill’s cost. She said she expected an agreement reflecting a consensus of all 50 senators in the Democratic caucus on the tax and revenue portion of the bill to emerge early this week.

The Democrats’ plan to pay for President Biden’s $3.5 trillion Build Back Better initiative will need to strike the right balance to appeal to progressives without alienating moderates. WSJ’s Gerald F. Seib discusses with tax policy reporter Richard Rubin. Photo illustration: Todd Johnson

The package is expected to include universal prekindergarten for 3- and 4-year-olds, subsidized child care, an expansion of beefed-up Affordable Care Act subsidies for three years, and tax incentives for people and companies to reduce carbon emissions, according to lawmakers and aides.

The Democrats’ Budget Plan

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