GOP targets for Dem bill: Inflation, taxes, Manchin, Sinema

Congressional Budget (Copyright 2022 The Associated Press. All rights reserved)

Congressional Budget (Copyright 2022 The Associated Press. All rights reserved)

Republicans see inflation, taxes and immigration as Democratic weak points worth attacking, and two opposition senators as prime targets, in the upcoming battle over an economic package Democrats want to push through the Senate.

The measure embodies some of the best environmental, energy, health and tax policy ambitions that President Joe Biden and party leaders want to implement as voters begin to tune in for this fall’s congressional elections. The GOP wants to derail or weaken the measure or at least force Democrats to take votes that would be painful to defend in re-election campaigns.

Republicans are already targeting Sen. Joe Manchin, DW.Va., who crafted the measure with Senate Majority Leader Chuck Schumer, DN.Y., unexpectedly pumping life into an effort most Democrats considered moribund. Manchin is a conservative Democrat from a deep red state who has rejected the party’s priorities before, and Republicans have bailed him out in recent days, an unsavory signal that they will come after him if he seeks re-election in 2024.

“He made a terrible deal,” Senate Minority Leader Mitch McConnell, R-Ky., told reporters this week. “How he can defend this from a West Virginia point of view, or think of it as a centrist kind of deal, is astounding. This is a deal only Bernie Sanders would love.”

Even Sen. Shelley Moore Capito, RW.Va., who has a strong relationship with Manchin and rarely clashes with him publicly, criticized the legislation for imposing a minimum tax on huge, profitable corporations that she said would discourage investment. “Like many West Virginians, I am concerned that this tax increase will delay closing the digital divide” in rural communities, she said.

Republicans are taking a softer approach with Sen. Kyrsten Sinema, D-Ariz., who has been cautious about the legislation and has expressed concern about tax increases. She is the party’s biggest question mark on this bill in the 50-50 chamber, where all Republicans appear to vote “no,” and she has had several discussions with GOP senators during votes this week.

Sinema has opposed previous proposals to raise taxes on wealthy corporate executives, which this time would raise about $14 billion of this legislation’s $739 billion in revenue. She met with Arizona manufacturers who oppose raising the minimum corporate tax and thanked her in a tweet afterward for her “thoughtful approach and willingness to listen to AZ job creators.”

“I don’t know what she’s thinking,” Idaho Sen. Mike Crapo, the top Republican on the Senate Finance Committee, told reporters. “‘We’re doing our thing’ is the best we can say.”

The GOP appears to be trying to remove or tone down the corporate minimum tax and language-increasing taxes on wealthy corporate executives as well, and is hoping to win over Sinema as the deciding vote for that. After she opposed the Democrats’ proposed tax increases last year on corporations and high incomes, they switched to a corporate minimum tax that she supported, but it is uncertain whether she will do so now.

Republicans could craft amendments aimed at specific Democratic senators — such as one exempting coal producers from certain taxes in a play for Manchin.

To bolster its argument, the GOP released an analysis by the nonpartisan Joint Committee on Taxation that Republicans said showed tax increases for people making less than $400,000 would violate Biden’s pledge not to raise taxes on that income group.

“Ordinary Americans would bear a significant portion of the burden of this tax increase,” said No. 2 Senate GOP Leader John Thune of South Dakota.

Democrats rejected that attack, noting that the study left out the effects of the bill’s health care and energy tax breaks for individuals. It also counted on lower wages, share prices and dividends it believed would occur as part of the effect the bill would have on people.

The 10-year measure includes hundreds of billions in spending and tax breaks to encourage alternative energy production and to bolster fossil fuels with measures such as tax breaks for technologies that reduce carbon emissions. There’s also money to help people buy private health coverage, and provisions that give Medicare the power to negotiate prices for some drugs with pharmaceutical manufacturers.

Overall, the Congressional Budget Office said Wednesday the measure could reduce federal deficits by about $305 billion. But $204 billion of that would come from improving tax collections by the IRS, which would be real if it happens, but the nonpartisan agency doesn’t count in its formal scoring of the bill’s impact.

In a bow to mainstream voters’ concerns about gas prices and overall consumer costs, Democrats are calling the bill the Inflation Reduction Act. Still, the impact on the country’s worst bout with inflation in four decades appears to be limited.

As the Senate prepares for days of votes on the measure, both parties are using studies to make dueling points.

The Penn Wharton budget model from the University of Pennsylvania estimated that the measure would “increase inflation greatly through 2024 and reduce inflation thereafter,” although the changes would be “statistically indistinguishable from zero.” McConnell said the study showed the Democrats’ bill would “actually increase inflation in the short term and do nothing for inflation in the long term.”

Democrats have cited a Moody’s Analytics report saying the bill would “nudge the economy and inflation in the right direction.” And they circulated a letter from five former Treasury secretaries, including Henry Paulson Jr., who served under GOP President George W. Bush, saying the measure would strengthen the economy, “lower costs for families and fight inflation.”

That battleground suggests Republican changes are likely to be on the topic of prices. One could imagine a proposal that prevents the bill from coming into force unless inflation, or petrol prices, fall to certain levels. Democratic leaders are trying this week to unite rank-and-file senators against such plans.

The GOP may also try to renew immigration restrictions imposed by President Donald Trump who cited the pandemic as a reason to exclude migrants, an issue that sharply divides Democrats. And they could seek to eliminate tax credits aimed at encouraging alternative energy and that favor companies that pay union-scale wages.

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AP reporter Seung Min Kim contributed to this report.

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