“Our group – comprised of 10 Senators, 5 from each party – has worked in good faith and reached a bipartisan agreement on a realistic, compromise framework to modernize our nation’s infrastructure and energy technologies,” read the statement from the bipartisan committee negotiating the scopes of the infrastructure plan.
The bipartisan group, led by Senators Kyrsten Sinema (D-AZ) and Rob Portman (R-OH), also stated in a release that “These investments will be fully paid for and will not include tax increases.”
Former presidential candidate and member of the bipartisan negotiating group, Mitt Romney, did not give such an optimistic message and stated that the negotiations are still “halfway done.”
A crucial part of the discussion is the amount to be approved on the infrastructure plan, which will potentially require the approval of an additional $579 billion. Implementation of the plan would total $973 billion over five years and about $1.2 trillion over the next eight years.
Proposals to pay for the additional spending that Biden’s infrastructure plan will entail include indexing the gas tax to inflation, imposing a tax on automobile mileage, and using unexecuted money originally earmarked for the pandemic.
Funding the infrastructure plan: the biggest difference between Republicans and Democrats.
Democrats have also suggested raising the capital gains tax from the current 20% to 43.5% for income over $1 million. This tax has been criticized by the GOP, as it would greatly penalize investment in assets such as real estate and in some states, such as New York, the tax would exceed up to 60% of income.
Although many Democratic senators, aware of the impact of supporting a capital gains tax increase, have proposed eliminating the ceiling on SALT tax deductions (which allow up to $10,000 of state taxes to be deducted from total federal taxes), the proposal has received a resoundingly negative response from the GOP and some senators from the Democratic Party itself.
Biden attempted to negotiate with Republicans not to raise corporate tax rates in exchange for setting a minimum floor of 15%. However, negotiations between the president and the GOP reached an impasse.
In the face of Republican reluctance to support raising the capital and income tax, Democrats have become reluctant to back measures such as indexing the gas tax to inflation, a measure that has received more support from the GOP as a source of funding for the infrastructure plan.
In part, the Democratic Party’s resistance to raising the gas tax is based on the fact that it would run counter to Biden’s pledge not to raise taxes on Americans earning less than 400,000. Increasing the gas tax would mean a generalized tax increase for all citizens.