Even as President Joe Biden agreed to a bipartisan compromise on infrastructure spending Thursday, he took—and later walked back—an uncompromising stance on a different proposal that would dramatically reshape the tax code and the social safety net.
- President Joe Biden compromised with Republican lawmakers on an infrastructure bill Thursday but said he wouldn’t sign it unless his American Families Plan bill is passed alongside it—only to soften this hardline stance later.
- The American Families Plan would fund child care and family leave while extending this year’s expanded and overhauled child tax credit.
- It all depends on whether Democrats can get the bill through a narrowly divided Senate using a legislative tactic called budget reconciliation—giving moderate Democrats leverage to make changes to Biden’s plan.
A group of Democratic and Republican senators and Biden agreed to a $1.2 trillion infrastructure spending plan Thursday that would fund highways, railroads, broadband Internet, and other projects without raising taxes. But Biden said he would not sign the bill into law unless Congress also passed the American Families Plan, an ambitious proposal to subsidize childcare, establish national paid family leave, and extend this year’s expansion and overhaul of the child tax credit, among other reforms. The $1.8 trillion in social safety net spending would be paid for by tax increases on the wealthy, including undoing Trump-era cuts for top earners, and hiking the capital gains tax.
“We need physical infrastructure, but we also need the human infrastructure as well,” Biden told reporters Thursday in a press conference following the announcement of the deal. “If they don't come, I'm not signing.”
Biden later said his remarks weren’t intended as a veto threat. In a statement Saturday, Biden said he still wanted to pass both bills together, but that he supported the infrastructure bill “without reservation or hesitation.”
In the absence of Republican support for the Families Plan, Biden said its success hinges on Democratic lawmakers, who control the House of Representatives but hold only a slim advantage in the Senate, passing it through a process called budget reconciliation. That’s the same legislative tactic that Democrats used to get Biden’s pandemic relief bill, the American Rescue Plan, through the Senate, in a 50-49 party line vote in March that didn’t allow the Republicans a chance to block it with a filibuster. Economists reading the political tea leaves predicted Biden might have to compromise again—this time with members of his own party—to get the bill passed.
“The real question, in our view, continues to be whether the more partisan parts of Biden's proposals, such as the higher taxes and increased spending outside traditional infrastructure, have enough support to get through reconciliation,” economists at Wells Fargo Securities wrote in a commentary. “We still suspect the answer is yes, but that the headline figures for both new spending and tax increases will need to be scaled back to garner enough support from the moderate Democratic senators.”
A major provision of Biden’s social safety net reform proposal would extend the changes to the child tax credit through 2025 (they’re currently set to expire after 2021). Not only was the maximum value of the credit increased to $3,600 per child from the previous $2,000, depending on the age of the child and the income of the household, but part of the credit is being delivered as monthly payments from the IRS of up to $300 per child starting July 15. The agency recently launched Internet-based tools for taxpayers to sign up for the credit if they don’t file taxes; view their eligibility for the credit; and choose to receive the entire amount all at once at tax time instead of partly in advance monthly payments—which could be advantageous for people in some circumstances.
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