After months of internal negotiations, Democrats have ended up with a bill that fails to raise income and corporate tax rates and does nothing on inheritances. Worse, the third-most expensive provision in their bill is a loosening of the cap on the deduction for state and local taxes, a payoff to high-income Americans in high-tax states. Democrats now propose funding the bill through corporate tax reforms that do not raise overall rates, a surtax on income over $10 million and enhanced Internal Revenue Service tax enforcement. This may bring in revenue, but not nearly enough to pay for the programs if they become (as Democrats hope) permanent. And it falls short of the original goal: tax reform that responds to the nation’s extreme wealth inequality.
On the spending side, the Democrats now propose extending an enhancement of the child tax credit, which slashed childhood poverty, for only a single year. Fixes to the Affordable Care Act would run only four years. The Democrats’ marquee universal prekindergarten program would get only six years of funding. The early expirations make these programs seem cheaper than they really are. The calculation is that future Congresses will refuse to allow popular benefits to expire, and the danger is that future lawmakers will use budget gimmicks or debt to renew them. They should focus on programs that have been proved to work and help those most in need: the child tax credit and earned-income tax credit and the Affordable Care Act, first and foremost.
On climate change, the bill lacks any enforceable carbon tax, cap or regulatory program to force down greenhouse emissions. Instead, it proposes vast subsidy programs. Those are far superior to inaction but far more costly and less effective than available alternatives.
It is naive to imagine that Senate Democrats will suddenly write the perfect bill, particularly because Democratic holdouts Sen. Joe Manchin III (W.Va.) and Sen. Kyrsten Sinema (Ariz.) are responsible for the party’s retreats on climate and tax rates, respectively. But there is vast acreage between this bill and perfection. Improving the legislation should not be too much for Americans to expect.