Biden and McConnell toughen their positions on tax hikes

Key Points
  • President Joe Biden said Monday that tax increases for millionaires and corporations are fundamental to creating a "fair" economy that rewards work and grows the middle class.
  • Senate Minority Leader Mitch McConnell said these same tax hikes would be a red line for congressional Republicans, effectively killing any chance of a deal on infrastructure spending.
  • Biden has an unofficial deadline of May 31 to see if he can find common ground with Republicans on an infrastructure package.
President Biden talks about American Families Plan at Virginia community college
President Biden talks about American Families Plan at Virginia community college

WASHINGTON — President Joe Biden and Republican Senate Minority Leader Mitch McConnell toughened their positions Monday over the tax increases for millionaires and corporations that Biden has proposed to fund his sweeping infrastructure and education plans. 

"We're open to doing a roughly $600 billion package which deals with what all of us agree is 'infrastructure,'" McConnell said at an event in Kentucky. "And to talk about how to pay for that in any way other than reopening the 2017 tax reform bill." 

Raising the corporate tax rate to 28%, up from 21%, is the linchpin of Biden's proposal to pay for the American Jobs Plan, a massive revamping of the nation's infrastructure and energy sector that would create jobs in the wake of the coronavirus pandemic. 

But McConnell on Monday called the 2017 tax cuts among the most significant domestic accomplishments of the past four years under former President Donald Trump. "We're not going to revisit that," he said.

McConnell's insistence on protecting the 2017 tax cuts effectively pours cold water on the best chance that the White House and congressional Republicans had to reach a deal on at least one part of Biden's sweeping domestic agenda. 

"I don't think there'll be any Republican support, none, zero for the $4.1 trillion grab bag, which has infrastructure in it, but a whole lot of other stuff," said McConnell.

Senate Minority Leader Mitch McConnell (R-KY) arrives to speak after the Republican caucus policy luncheon on Capitol Hill in Washington, April 13, 2021.
Joshua Roberts | Reuters

But it wasn't just McConnell who drew a line in the sand on Monday. 

Biden did too, during a visit to a community college in Norfolk, Virginia, where he touted the proposed expansion of pre-kindergarten and community college scholarships, part of his American Families Plan to expand the social safety net.

This $1.8 trillion plan would be paid for largely by changes to individual tax laws, including higher income tax rates for the very rich and stiffer enforcement by the IRS.

"I come from the corporate capital of the world," said Biden, who hails from the incorporation hub of Delaware. "I'm not anti-corporate, but it's about time they start paying their fair share," he said. "It's about making a choice."

"I don't wanna punish anybody, but everybody should chip in, everybody should pay something along the road here. The choice is about who the economy serves, and so I plan on giving tax breaks to the working class folks, and making everybody pay their fair share," said the president. 

In addition to a return to pre-2017 income tax rates for the highest earners, Biden proposes to expand the IRS' ability to verify individual incomes, to tax capital gains upon death and to increase the capital gains tax rate to nearly 40%, which would match the individual income tax rate. 

Biden was careful on Monday not to personally vilify the very rich, saying, "They're good people, they're not bad folks."

But the president also made it clear that he sees these tax hikes as more than just a necessary evil to fund his big plans: They're a key part of reestablishing a sense of shared responsibility and shared burden across the American economy.

"For too long, we've had an economy that gives every break in the world to the folks who need it the least," he said. "It's time to grow the economy from the bottom up and the middle out."

Despite McConnell's hard line, White House officials plan to dedicate additional time this week to lobbying key Republicans in Congress to support the infrastructure overhaul.

Biden also plans to host McConnell, House Minority Leader Kevin McCarthy, House Majority Leader Nancy Pelosi and Senate Majority Leader Chuck Schumer at the White House on May 12 for a broader discussion on shared priorities.

But Democrats in and around the White House acknowledge that Biden has a narrow window of time in which to pass the biggest pieces of his domestic agenda, and they are wary of spending too much time courting Republicans for votes that might never materialize. 

Veteran Democratic political strategists in Biden's orbit also vividly recall former President Barack Obama's extensive outreach to Republicans in 2009 for support for the Affordable Care Act. Despite months of effort, Obama's signature legislation ultimately failed to garner any GOP votes. 

According to Sen. Chris Coons, D-Del., a close Biden ally, there is an unofficial deadline of May 31 for the White House and congressional Republicans to reach a consensus, if one is at all possible.

"I believe that President Biden is open to spending the next month negotiating what the possibility is," Coons told Punchbowl News in an interview last month.

If no deal has been hammered out by Memorial Day, Coons said, "I think Democrats just roll it up into a big package and move it."