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Democrats drop paid family and medical leave from social spending package


Congressional Democrats signaled Wednesday they would ditch plans for paid family and medical leave in an effort to trim costs and secure an elusive deal to push through a massive spending bill.

It marked the latest attempt to bridge the divide between liberals and moderates but would come at the cost of one of President Biden’s key campaign pledges. 

During another day of frenetic activity, the two moderate holdouts, Sens. Joe Manchin and Kyrsten Sinema, met with Biden aides on Capitol Hill before saying they were confident of ‘progress.’

Later three sources familiar with ongoing discussions told Politico that Senate Democrats were dropping paid family and medical leave from the reconciliation bill. 

It followed a confusing back and forth between House and Senate members, who first floated and then withdrew the idea of using a tax on billionaires to help pay for the package. 

Biden aides are pressing Democrats to come together around a set of plans with a $1.75 trillion price tag before the end of the week, a move that would also unlock the president’s stalled $1 trillion infrastructure bill. 

Discussions on Wednesday centered both on how to trim the cost of the bill and how to generate funding. 

Biden is due to fly to Rome, Italy, on Thursday to attend a G20 summit followed by a climate conference in Glasgow, Scotland, but is keen to be able to tout progress on his domestic agenda before a tight gubernatorial election in Virginia on Tuesday.

Last week he admitted that family leave was being trimmed down.

‘It is down to four weeks,’ he said during a CNN town hall. 

‘And the reason it’s down to four weeks is I can’t get 12 weeks.’ 

Democrats are closing in on a deal to push through some $1.75 trillion in social spending but it will come at the cost of paid family and medical leave, key parts of the Biden agenda

Sen Kyrsten Sinema

Sen Joe Manchin

White House aides met with Democratic holdouts Sens. Kyrsten Sinema and Joe Manchin as they tried to negotiate a deal to keep Biden’s social spending plan on track

The U.S. is one of the few industrialized countries that does not have a universal paid leave program. 

And Biden made changing that a central part of his election campaign last year before ensuring it was a key part of his social agenda.

Dropping it might help woo centrists but it could cost the support of other senators.

‘Until the bill is printed, I will continue working to include paid leave in the Build Back Better plan,’ said Sen. Kirsten Gillibrand. 

High profile supporters include  Meghan, Duchess of Sussex, who last week wrote to Democratic Party leaders urging them not to let the measure slip.

‘This is about putting families above politics,’ she wrote. 

‘And for a refreshing change, it’s something we all seem to agree on. At a point when everything feels so divisive, let this be a shared goal that unites us.’

Earlier, White House Press Secretary Jen Psaki offered an optimistic picture and said the administration was monitoring progress ‘hour by hour.’

She said the president could yet visit Capitol Hill before flying overseas. 

‘We are on track now to move forward once we get an agreement,’ she said.

But there were other setbacks along the way, as Democrats haggled over how to pay for the plans and whether a tax on billionaires would be part of the mix.

The Senate’s top tax writer, Finance Committee Chairman Ron Wyden, floated the idea early on Wednesday but it was nixed in the afternoon by his House of Representatives counterpart, Ways and Means Committee Chairman Richard Neal, who said it was too complex to work.

That was not the end of the matter.  

Wyden chimed back. ‘Last time I looked, the United States Senate has a say, too. We’re continuing to work with members,’ he said, Business Insider reported.  

House Ways and Means Committee Chair Rep. Richard Neal expressed concern over the billionaires tax

Senate Finance Committee Chair Ron Wyden introduced the plan this morning

House Ways and Means Committee Chair Rep. Richard Neal (left) said Senator Ron Wyden’s (right) billionaire tax was out of Biden’s economic plans, but Neal disputed that moments later

Billionaire’s Tax: Quick Facts 

  • Affects people making more than $100M annually or own more than $1 billion in assets for 3 or more years  
  • When selling tangible assets like real estate or a business, they would pay a ‘deferral recapture amount’ in interest on top of their usual tax 
  • It’s estimated the tax will raise $250 billion over 10 years
  • Architects of the billionaires tax say it will affect roughly 700 people
  • Marked to market: Billionaires would pay taxes on tradable assets like stocks if they increase in value year-over, rather than just a capital gains tax once sold

It’s the latest in a series of intra-party divides being played out on the public stage as Democrats desperately try to hammer out a deal on Biden’s multi-trillion dollar spending initiatives this week.

The proposed tax would have hit the gains of those with more than $1 billion in assets or incomes of more than $100 million a year and will provide funding for the president’s sweeping $2 trillion social reform and climate change spending bill. 

Upon releasing the plan Wyden estimated it would affect 700 of America’s most wealthy taxpayers and bring in as much as $250 billion. 

Republicans criticized the billionaires’ tax as a ‘harebrained scheme,’ and some have suggested it would face a legal challenge. 

Even some Democrats voiced concerns – Neal said earlier that he told Wyden the billionaires’ tax may be more difficult to implement than the route his panel took in simply raising rates on corporations and the wealthy.

He told reported this afternoon, ‘I think it’s unlikely to come up [in the House] if it can’t pass in the Senate.’

‘There’s a lot of angst in there over the billionaire’s tax, and that wasn’t prompted by anybody other than the issue.’

Senator Mark Warner of Virginia told Huffington Post that he feared the tax could ‘disrupt markets.’

‘The devil’s in the details,’ Warner said.  

During her briefing Psaki said Biden supported the Senate Democratic plan to tax billionaires but at least stopped short of saying whether the major revenue-raiser would even be in a final reconciliation bill. 

She also vouched for the legality of the proposal for the government to get at the vast fortunes amassed by about 700 people – whose wealth resides in huge stock holdings they have sometimes held for decades. 

President Joe Biden supports a Senate Democratic plan to tax billionaires, White House Press Secretary Jen Psaki said Wednesday – although it was unclear if it is part of a Build Back Better package being negotiated

President Joe Biden supports a Senate Democratic plan to tax billionaires, White House Press Secretary Jen Psaki said Wednesday – although it was unclear if it is part of a Build Back Better package being negotiated

Democrats’ billionaires tax could face legal challenges

The billionaire’s tax plan involves paying penalties on wealth and unrealized gains – or assets that have gone up in value but haven’t been sold for profit, as well as a tax on people whose wealth crosses $1 billion.

Those could be considered ‘direct taxes,’ which the Supreme Court broadly defined in 1895 as fees on ‘real property’ like land and buildings as well as ‘personal property’ such as financial assets, stocks, bonds.

Direct taxes are apportioned to each state according to its population. 

If a wealth tax raises taxes on a billionaire in California, the revenue must be apportioned across each state’s direct taxes.

That could leave poorer states with fewer rich residents in financial strain as the amount of money in their allotted share increases.

The 16th Amendment to the Constitution carves out an exemption for income taxes. 

Billionaires fighting the tax in court could claim that taxes on unrealized gains and penalties on crossing the $1B wealth threshold do not count as income taxes.

‘We’re not going to support anything we don’t think is legal. But I will tell you the president supports the billionaire’s tax. He looks forward to working with Congress and Wyden to make sure the highest income Americans pay their fair share,’ she said. 

But tax experts warned that the wealthy were adept at giving up their money.

David Williams, president of the Taxpayers Protection Alliance, said: ‘Billionaires are good at two things: One, making money and two, avoiding taxes

‘They will find loopholes – they will find ways, whether it’s to invest in trust funds or other assets that don’t appreciate value to avoid paying this wealth tax.’

And he said it would mark a radical break with existing tax theory. 

‘First of all, we don’t tax wealth in this country, we tax income, and we’re going to have to change our tax system to accommodate this new billionaire’s tax, and it’s probably not going to raise the revenue that Congress thinks it’s going to raise,’ Williams said.  

Neal, as well as lawmakers on Republicans’ side of the aisle, have questioned whether the new tax could pass constitutional muster.

The US Constitution mandates that each state must pay ‘direct taxes’ – in other words, taxes imposed on a person or organization rather than on goods and services bought or sold – proportional to its population.

If the billionaire’s tax is classified as a direct tax, redistributing how much money comes from each state and potentially raising that threshold on states that have no billionaires and couldn’t afford it, it would be impossible for those states to meet the heightened tax requirement. 

Washington Post op-ed uses the example of Alabama. Because 1.5 percent of the US population is from Alabama, 1.5 percent of direct tax revenue would need to come from there as well. But if states where billionaire’s live begin handing in larger shares, the proportional amount the relatively poorer state, with no billionaire residents, would pay rises as well. 

Negotiators need to find revenue sources after Sen. Kyrsten Sinema (D-AZ) reportedly came out against corporate and individual rate hikes

Negotiators need to find revenue sources after Sen. Kyrsten Sinema (D-AZ) reportedly came out against corporate and individual rate hikes

Sen. Kyrsten Sinema, D-Ariz., left, and Sen. Joe Manchin, D-W.Va., board an elevator as they leave a meeting, Wednesday, Oct. 27, 2021, on Capitol Hill in Washington

Sen. Kyrsten Sinema, D-Ariz., left, and Sen. Joe Manchin, D-W.Va., board an elevator as they leave a meeting, Wednesday, Oct. 27, 2021, on Capitol Hill in Washington

President Joe Biden heads to Rome Thursday

President Joe Biden heads to Rome Thursday

A 1895 Supreme Court case ruled that ‘direct taxes’ include physical property like lands and buildings, financial assets like stocks and bonds, and that those would be subject to states’ apportionment. 

The 16th Amendment carved out an exception for income taxes, which do not factor into the states’ tax amounts. 

But since the billionaire’s tax is at least partly based on wealth defined by physical property and financial assets, it could feasibly be considered a direct tax that raises the national apportionment and puts a strain on lower-income states with few or no billionaires. 

And taxing gains in the stock market or other financial assets before they’re sold for profit could fall outside the 16th Amendment’s purview of ‘income.’ 

Williams said the Constitution’s direct tax clause will be what foils the billionaire’s tax.

‘That’s why the income tax had to be an amendment to the Constitution, because of the way it’s dolled out to the states,’ he said.

‘In addition to the constitutional problem, people are missing the bigger issue here. because wealth does not equal income, and what one person’s wealth is today may not be tomorrow or next month.’ 

Elon Musk, the Tesla founder and a billionaire, is another critic. 

‘I anticipate that any new unrealized capital gains taxes will slowly make their way down to middle class retirement investments over the next several years. It will start with billionaires, then eventually millionaires, then the modest investments will get hit possibly within a decade,’ he wrote Monday.





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