Democrats tax plan puts their fragile majority at risk

Post By Manzi | August 2, 2022

Democrats' tax plan puts their fragile majority at risk

Charlie Dent, a CNN political commentator, is a former Republican congressman from Pennsylvania who served as chair of the House Ethics Committee from 2015 until 2017 and of the House Appropriations Subcommittee on Military Construction, Veterans Affairs and Related Agencies from 2015 until 2018. He's a member of the board of directors of CARE USA, a nongovernmental organization that works to fight poverty and aid vulnerable populations around the world. The views expressed in this commentary are his own. View more opinion on CNN.

(CNN)Back in July I pointed out that the Democrats' massive $3.5 trillion reconciliation spending plan put their fragile congressional majorities at risk. Since then, and to make matters worse, House Democratic leaders tied passage of this partisan reconciliation spending to the painstakingly negotiated bipartisan infrastructure bill passed by the Senate last month, which now awaits consideration by the House. In other words, the $1.2 trillion infrastructure bill, which is desperately needed and has broad bipartisan support, is being held hostage until the votes are secured to pass the partisan $3.5 trillion reconciliation bill.

Democrats in the House Problem Solvers Caucus, made up of 29 members from the GOP and 29 from the Democratic Party, have forced their leadership to commit to bringing the infrastructure bill to the House floor by September 27. This explains the Democratic leadership's panicked sprint to pass the reconciliation bill, come hell or high water, by that date in the House in order to appease their fiery progressive wing who demand a package deal.

Further complicating matters, West Virginia moderate Sen. Joe Manchin prudently called for a "strategic pause" on the reconciliation bill. House Speaker Nancy Pelosi rebuffed Manchin's demand and made clear she's unwilling to pare back the massive $3.5 trillion plan. So much of this new spending will occur on a recurring basis -- universal Pre-K, free community college, expanded Medicare services -- unlike most Covid-19 relief spending that is non-recurring. Remember that the proposed reconciliation spending is in addition to the nearly $6 trillion previously spent for Covid-19 relief, most of which was essential to assist working families and businesses devastated by the pandemic through no fault of their own.

House Democrats last Monday revealed legislation to raise taxes by more than $2 trillion that would pay for some, but not all, of their new spending under reconciliation. While taxing the rich may have a populist appeal in the abstract, it remains to be seen how popular taxing small businesses will be on Main Street. I'm betting Main Street won't like what's in this tax stew.

Pretending that raising taxes on American corporations and small businesses will not harm workers and the broader economy is wishful thinking. House Democrats are proposing to raise the corporate tax rate from the current 21% to 26.5% for companies with a taxable income of more than $5 million, which is still lower than the 35% that was in effect before the 2017 GOP tax cuts that I voted for.

If this corporate tax rate increase were the only change on the table, Democrats might be able to sell it -- but it's not. This legislation has several provisions, like limits on deductions and a surtax on small businesses making over $5 million, that could be the making of a tax revolt against the Democrats.

For President Joe Biden to suggest that none of this will harm people making under $400,000 a year is pure fantasy. The president has pledged that individuals earning less than $400,000 won't face any higher taxes.