Senators Call on Biden to Tax the Rich in Deal to Avoid U.S. Debt Default

Democrats on Capitol Hill say that the White House needs to flex its muscle and push Republicans to show they're serious about driving down the national deficit. This means bringing the possibility of tax hikes on the wealthy to the debt limit negotiating table.

"Before you cut programs for the elderly, the children, and the poor, you've got to ask the wealthiest people and the largest corporations to start paying their fair share of taxes," Senator Bernie Sanders, a Vermont Independent, told Newsweek. "I'm not privy to any secret information here, but right now, if revenue is off of the table, that is totally absurd."

House Republicans remain adamant that a deal to increase the debt limit and lower the national debt will include no new taxes. Per a Tuesday meeting between President Joe Biden and Speaker Kevin McCarthy, GOP debt reduction requests center around discretionary spending caps, rescinding unspent COVID-19 money, changes to energy permits, and raising work requirements for government aid.

Republicans have stated that their spending cuts would not reduce the Department of Defense budget, funding of veterans' medical benefits, or resources for border security, all the while preserving Social Security and Medicare. According to a recent analysis conducted by The New York Times, this would result in 51 percent spending reductions across all other agencies under the spending caps put forth in a GOP proposal that passed the House in late April. These areas are where the cuts that Sanders mentions could materialize.

"We are living in a moment of massive income and wealth inequality, working class people are struggling, poor people are living in really bad ways—You don't cut programs to the children, the elderly, and working families and say to the billionaire class, 'Sorry, you don't have to pay your fair share of taxes,'" Sanders said. "That is totally absurd."

While taxes for the wealthy and corporations may not be a current part of the conversation, a recent report has fueled the Democratic assertion that they should be considered.

A memo released Tuesday by the nonpartisan Congressional Budget Office, written at the request of Democratic Senators Sheldon Whitehouse of Rhode Island and Ron Wyden of Oregon, found that permanently extending the Tax Cuts and Jobs Act of 2017, passed under former President Donald Trump and set to largely expire in 2025, would raise the nearly $32 trillion national debt by an additional $3.5 trillion.

In a brief conversation on Capitol Hill, Wyden, who chairs the Senate Finance Committee responsible for tax law, told Newsweek that debt limit negotiations should look at addressing means through which the wealthy and corporations avoid paying taxes.

The Oregon Democrat pointed specifically to comments made during a Wednesday Budget Committee where former Treasury Department Deputy Assistant Secretary for Economic Policy Bruce Bartlett told lawmakers that a key problem with raising tax revenue is "enforcement" and that providing resources to the IRS supports efforts to generate revenues that can offset the national debt. Democratic Senator Sherrod Brown of Ohio echoed Wyden's and Sanders' calls.

"We should eliminate the giveaways to corporate America that they insisted on and passed five years ago," Brown told Newsweek. "Republicans, they're always looking out to give rich people tax cuts—That's who they are."

The 2017 tax permanently cut the federal corporate income tax rate from 35 percent to 21 percent and lowered individual income tax rates through 2025, according to the CBO. A 2017 analysis of the bill by the Tax Policy Center states that the largest cuts go to "taxpayers in the 95th to 99th percentiles of the income distribution." The Heritage Foundation reports that in 2018 the bill spurred economic investment that resulted in an increase to annual wages of "about $1,400 above trend."

Republican Senator Josh Hawley of Missouri disagreed with putting tax hikes up for debate, instead saying he'd like to see revenue generated from increasing tariffs on China. Hawley also took issue with Wyden's stance regarding tax enforcement, telling Newsweek that he supports the House GOP proposal to make lifting the debt ceiling contingent on cutting the funding provided in Biden's Inflation Reduction Act for the hiring of 87,000 new IRS agents.

Hawley and other Republicans state that these agents will target working people and small businesses. Democrats and the Biden administration state they will focus on going after the wealthy and corporations.

Senator Chris Murphy of Connecticut, a Democrat, believes that the GOP's lack of interest in raising taxes on the wealthy indicates a lack of commitment to lowering the national debt. Instead, he says the party's position and spending reduction demonstrate an agenda that periodizes cutting programs for the needy to preserve tax carveouts for the rich.

"Republicans bear a big piece of responsibility for driving up the debt by passing massive tax cuts for billionaires and millionaires without paying for it," Murphy told Newsweek. "Their agenda is not deficit reduction. Their agenda is to pass out favors to their billionaire corporate friends and to make all the rest of us pay for them."

While Senate Democrats are vocal in this stance, negotiations at the moment are between Biden and McCarthy. Following the Tuesday meeting, Congressional leadership in the Senate and Democratic leadership in the House agreed to pull their teams from the talks, meaning less voices will occupy the room as lawmakers rush to reach a deal before the expected June 1 default date.

Republican Senator John Neely Kennedy of Louisiana is aware of this development and noted that it has informed his thinking on the matter. He said that he is confident that Biden and McCarthy will reach a deal and that those in Congress who "don't have untreated mental illness know that." He doesn't expect that people "will be in love with it" but that this deal will ultimately make it to the president's desk.

"If you ask around in the Senate, and I suspect it's the same thing in the House, everybody has an opinion about what ought to be in it, but the only two opinions that count right now are President Biden and Speaker McCarthy," he told Newsweek. "Opinions are like elbows, everybody has them."