Senate group says tax increases off the table as part of infrastructure bill

A bipartisan Senate group said Wednesday that all tax increases that were part of the proposed Biden infrastructure bill now in discussion there have been taken off the table. 

Democrats and Republicans are in the process of negotiating a final package, but it became clear that a proposed tax increase on capital gains was a sticking point for Republicans.

Talks between the White House and Republicans in the Senate collapsed on Tuesday, but the group hopes that further negotiations will be possible now that tax increases will not be part of the plan.

Sen. Jon Tester (D-MT) said in response to a question Wednesday about whether tax increases are out, “That’s my understanding. I think there’s ways to do that; hopefully it won’t be smoke and mirrors. Bottom line, this is probably the hardest part from my perspective, is how you get it paid for.”

“If it’s paid for”

Tester said he thought President Joe Biden would approve of an infrastructure plan without a tax increase “”if it’s paid for.”

The group is still working to nail down how the bill will be paid for, however. Sen. Mitt Romney (R-UT) said that the “payfors” in the bill are “a little less solid” than other aspects of the bill.

The group is reportedly planning to propose a $900 billion infrastructure option, but has not officially made that number public yet. Biden’s original proposal was $2.2 trillion, but included a lot of things that were not technically infrastructure, like child care and elder care provisions.

According to CNBC, options to pay for the bill include increases in the gas tax, a mileage tax, or a bond issue. But economists like Tony Fratto, a George W. Bush-era Treasury official, say that infrastructure pays for itself in jobs created and revenue generated, and shouldn’t need to be funded with a tax increase.

Infrastructure pays for itself

“You can make a very strong case to borrow the money and pay it back over time on the expected returns,” he said. “We have failed to invest in all of the infrastructure needs that this country has by this fictional argument that it must be paid for for us to do it.”

And there may be a way to pay for a smaller infrastructure bill like the one the bipartisan group advocates without needing to borrow more money.

Sen. Pat Toomey (R-PA) has called on lawmakers to use nearly a trillion in unspent COVID relief funds to pay for the infrastructure bill. If that happens, any return on the investment can then go to further federal debt relief.

It would be unusual for a Democrat-run administration and Congress to show such fiscal responsibility, and they sure haven’t shown it up to this point, but Republicans could be a check on their unfettered spending by refusing to pass a bill until they get the restraint they seek.

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