Dems Mull Billionaire-Tax Plan as Corporate Tax Boost Fades | Biden Wants Votes

USDA’s food price update on Monday will be watched for further signs of inflation

Washington Focus

The House and Senate are in session.

In Washington, there is growing optimism that a vote on the bipartisan infrastructure bill (BIF) and a trimmed down reconciliation spending proposal will eventually go to a vote. Across the Atlantic, the United Nations climate summit in Glasgow takes place following G20 talks in Rome over the coming weekend, which could lead to decisions on climate targets.

Another self-imposed deadline missed, but Biden, Democratic leaders in Congress say they are ‘close.’ A deal on the social spending/climate change package (BBB) could allow the House to vote on a separate $550 billion bipartisan infrastructure (BIF) bill that has been held up by progressive lawmakers who first want the agreement on the larger bill. Leaders have said they want to vote on the infrastructure bill before the Oct. 31 expiration of current highway funding.

Sen. Joe Manchin (D-W.Va.) met in Delaware Sunday morning with President Biden and Senate Majority Leader Chuck Schumer (D-N.Y.).

House Speaker Nancy Pelosi (D-Calif.) said she’s “hopeful” that the House and Senate could vote on a package of taxes and spending that would carry out a trimmed down version of Biden’s plans. "We have 90% of the bill agreed to and written. We just have some of the last decisions to be made," Pelosi said on CNN's State of the Union. "I think we are pretty much there now," Pelosi said when asked if an agreement would be reached before the president leaves for Europe on Friday.

Pelosi also said that the scaled-back BBB plan is still set for an Oct. 31 vote, when federal highway funding expires. "There was no deadline that was missed because of the progressives. The deadline was missed because they changed from $3.5 [trillion] to one half of that," Pelosi added. "Because the bill is not written yet, we hope it will be written today (Sunday) and introduced tomorrow, only then can the joint tax committee evaluate what it brings in," Pelosi noted of plans to fund the new plan. Pelosi said she hoped the House could start voting as soon as this week, but no schedule was set. Democrats had imposed a Friday deadline to at least reach an agreement, but no deal was announced. Democrats continued negotiating through the weekend, with all sides indicating just a few issues remained unsettled.

Timeline pressured by COP26. Rep. Ro Khanna (D-Calif.) on the timing of the reconciliation bill, on Fox News Sunday: “The president looked at us in the eye and he said, ‘I need this before I go represent the United States [in] Glasgow, American prestige is on the line.’ Many members understand that we're working very hard to get a deal. I understand we're close and I'm confident we're going to get there.” See Biden’s schedule below.

Remaining issues include proposed corporate tax hikes to help finance the plan, and an effort to lower prescription drug costs, which has raised concerns from the pharmaceutical industry. Biden said the discussions were “down to four or five issues.”

The White House appears to be abandoning plans for reversing Trump-era tax cuts in favor of an approach that includes a 15% minimum corporate tax and a tax on the investment incomes of billionaires (proponents note America’s billionaires are more than a trillion dollars richer now than they were before Covid-19 struck). Under the current discussions, the 21% corporate rate would not change, nor would the top individual rate of 39.6% on those earning $400,000, or $450,000 for couples. However, the White House is reviving the idea of a minimum corporate tax rate that would apply even to companies that claim no taxable income — a frequent target of Biden, who complains they pay zero in taxes. Under the proposal, people with $1 billion in assets or $100 million in income for three consecutive years would be brought into a new tax system. Initially, they would have to assess the current value of their tradable assets — like cash, stocks and bonds — and their value when they were purchased, then pay a one-time tax on them. Then each year, those billionaires would assess the annual increase or drop in the value of those assets and pay capital gains taxes on an increase or take a deduction for losses, whether they sell any. To keep billionaires from selling off stocks and bonds for less liquid assets like real estate, the plan would impose an annual interest fee on the gains in value, which would be paid all at once at the time of sale. The approach would face constitutional challenges and other hurdles such as how would the IRS assess the increased value of a piece of art in a given calendar year?

Billionaires also often borrow against their non-taxed assets, which allows them to spend a lot of money while effectively paying very low taxes relative to their income and worth. Another idea: tax corporations that buy back their own stock — a move that reduces the number of outstanding shares, which boosts the value of the remaining shares, thereby rewarding shareholders and the top corporate executives who are routinely awarded with shares when the value of shares rises. Not coincidentally, it’s those very top corporate executives who make the decision to buy back shares, thereby considerably enriching themselves. But House Ways and Means Committee Chairman Richard Neal (D-Mass.) says he’s not currently looking at taxes on stock buybacks to pay for Biden’s economic agenda. “They’re pretty complicated right now,” Neal said. “I think you have to go back to the committee process again.”

Biden acknowledged major reductions to his original vision, signaling the final plan would no longer provide tuition-free community college, but adding he hoped to increase Pell Grants and other forms of tuition assistance to make up for that. The bill would have committed $45.5 billion to waive two years of tuition at community colleges for a period of five years. He also said that what had been envisioned as a federally paid, months-long family leave program would be just four weeks, nowhere near the average of parental leave in other industrialized countries, proponents note. As for expanding Medicare to include dental, vision and hearing aid benefits for seniors — a priority for Sen. Bernie Sanders (I-Vt.) — Biden said he likes the idea, but with Sens. Manchin and Kyrsten Sinema (D-Ariz.) objecting, the proposal is “a reach.” Instead, he said, Democrats are considering offering seniors an $800 voucher for dental care, as well as another program for hearing aids that Sinema may support. Biden said that the vision care component had been harder to resolve, and that there was no consensus yet. (24 million Medicare patients — nearly half of those enrolled — didn't have dental coverage in 2019, according to a recent Kaiser Family Foundation report.) Meanwhile, a proposal to lower the Medicare eligibility age also did not make the cut.

The extended child tax credit, which was initially passed in the Covid-19 relief bill, is set to expire in December and Democrats are hoping to extend it as part of the Build Back Better package. But it’s likely to be scaled back. Talks are focusing on a one-year extension rather than four years. And Sen. Manchin has called for a tighter income cap on those who can benefit, as well as work requirements for recipients, which Biden has publicly opposed.

On climate change issues, Biden said Manchin doesn’t want to “rush” the transition to clean energy in a way that results in major job losses in his coal-producing state — more on this in Monday’s Policy Updates.

— President Biden’s coming trips/meetings include:

Oct. 28: President Biden leaves for Italy and Scotland ahead of the G20 leaders' summit in Rome next weekend. Biden will be accompanied by first lady Jill Biden.
Oct. 29: Meets Pope Francis in Vatican City.
Oct. 30-31: Group of 20 (G20) meeting. Biden wants to smooth things over with the French amid the worst diplomatic spat between the two nations in years. He plans to meet with French President Emmanuel Macron.
Nov. 1-2: Glasgow, COP26 climate summit, which lasts until Nov. 12.

On the hearing front, the House Oversight Committee sent out an advisory on Friday confirming that executives from ExxonMobil, Chevron, Shell and BP — as well as the American Petroleum Institute (API) and the Chamber of Commerce — will appear at a hearing this week. Ahead of Thursday’s hearing, the committee is already expressing discontent with its witnesses, claiming in the notice that “to date, all the fossil fuel entities have failed to adequately comply with the Committee’s request” for documents. But Exxon’s spokesperson said that it has “provided documents and continue[s] to communicate with staff;” BP’s spokesperson said it “made two substantial productions of information that total thousands of pages” and planned to deliver more; Shell’s spokesperson said that it “delivered to the Committee thousands of pages of documents” and API said that it “has already produced thousands of pages responsive to their request.”

Ag biotechnology is the focus of a Tuesday morning hearing of the House Ag Committee.

Consumer Financial Protection Bureau Director Rohit Chopra will testify Thursday before the Senate Banking Committee. This is the first time Chopra will speak in his new capacity in front of Congress.

Climate change: The House Select Committee on the Climate Crisis on Thursday will hold a hearing, “International Climate Challenges and Opportunities.”

Regarding nominations, the Senate Ag Committee Wednesday morning will hold a hearing to consider the nomination of Rostin Behnam to be Chair and Commissioner of the Commodity Futures Trading Commission.

The Senate Finance Committee on Tuesday will hold a hearing on the nomination of Maria Pagan to be deputy U.S. trade representative in Geneva.

An FDA advisory committee meeting on Oct. 26 will analyze data on Pfizer's vaccine for children between the ages of 5 and 11.

On Tuesday, the Economic Club of Washington, D.C. will host the Carlyle Group's David Rubenstein in a conversation with Sen. Manchin at 7:30 a.m. ET, in-person.

Economic Reports for the Week

Economic data this week includes the Conference Board's Consumer Confidence Index for October on Tuesday, the Census Bureau's durable-goods report for September on Wednesday, and the Bureau of Economic Analysis' preliminary estimate for third-quarter GDP on Thursday. Economists' consensus estimate is for a seasonally adjusted annual growth rate of 4%, after the economy grew 6.7% in the second quarter.

Tuesday, Oct. 26

Census Bureau reports sales of new single-family houses for September. Consensus estimate is for a seasonally adjusted annual rate of 775,000 homes sold, 35,000 more than the August figure.
Conference Board releases its Consumer Confidence Index for October. Expectations are for a 110 reading, similar to the September data. The index is 15% lower than its recent peak in June, with concern about the spread of the Delta variant and inflation dampening consumer optimism.
S&P CoreLogic releases its Case-Shiller National Home Price Index for August. Economists forecast a 20% year-over-year rise, a tick higher than July’s 19.7% increase. If that estimate proves correct, it would be the fifth consecutive monthly record gain for the index.

Wednesday, Oct. 27

MBA Mortgage Applications
Census Bureau releases the durable-goods report for September. New orders for manufactured durable goods are expected to decline 0.5% month over month to $262 billion, after a 1.8% gain in August. Excluding transportation, new orders are seen rising 0.8%, above August’s 0.3% gain.

Thursday, Oct. 28

Jobless Claims
Bureau of Economic Analysis reports its preliminary estimate for third-quarter GDP. Consensus estimate is for a seasonally adjusted annual growth rate of 4%, after the economy grew 6.7% in the second quarter.
Fed Balance Sheet

Money Supply

Key USDA & international Ag & Energy Reports and Events

USDA’s update on food prices comes Monday amid renewed interest in rising prices.

Monday, Oct. 25

Ag reports and events:

Export Inspections
Crop Progress
Food Price Outlook
Poultry Slaughter
Monthly MARS bulletin on crop conditions in Europe
Malaysia Oct. 1-25 palm oil exports
Holiday: New Zealand