Washington Weekly: Republican Tax Increase?

U.S. Office of Public Policy, 13 May 2022

9 min read

This Week:

The Senate confirmed various Biden administration nominees and failed to get the 60 votes required to vote on a measure to codify the access to abortion provided under the 1973 Roe v Wade Supreme Court decision (see below). The House passed a $40 billion bill to deliver aid to Ukraine (see below) and a resolution for House staffers to unionize. It also passed a bill to expand rights for Transportation Security Administration workers and a bill to expand health care access for federal firefighters.

Next Week:

The Senate will continue to vote on Biden administration nominees. The House is expected to vote on a bill that would prohibit gas price increases during national energy emergencies and a bill that would overhaul the workforce development system.

The Lead

Congress and Abortion.

Following last week’s leaked draft of a Supreme Court opinion to overturn Roe v Wade, the Senate acted quickly to vote on a measure to codify access to abortion nationally. The bill’s abortion standard would have superseded any state laws with regard to abortion. However, as expected, the measure received 49 votes (51 against), well short of the 60 votes needed to pass. While legislative activity surrounding the issue will be put aside for the time being, there will be no shortage of debate on the issue going forward given the passions on both sides. If the Court’s final opinion (expected in late June) is consistent with the draft, it will then be left to each state to determine its own policy on abortion.

Russia, Ukraine and the US.

The House passed a bipartisan $40 billion bill to provide Ukraine with further military and humanitarian assistance. The level of aid is higher than the $33 billion requested by President Biden last week. As a way to get the support to Ukraine more quickly, the bill includes a provision allowing the US to pull weapons from its own inventory to send to Ukraine. The Senate should vote on the measure next week. While the general public and Congress (on a bipartisan basis) strongly supports this assistance, will it continue to be supportive when the administration and Congress feel a need to double and triple this spending amountover the next six months?

Other Issues

Republican Tax Increase?

We have received a few questions about President Biden’s claim that a new “Republican tax plan” calls for tax increases on individuals. President Biden was referring to Senator Rick Scott’s (R-FL) 11-point “Rescue America” plan. With respect to the tax provision referred to by the President, the plan states: “All Americans should pay some income tax to have some skin in the game.” If enacted, that plan would theoretically impact low- and middle-income Americans who do not currently pay federal income taxes (about half of US households). Senator Scott does not provide specifics on this particular provision (or on many of his other proposals, which cover a wide range of policy issues). We aren’t aware of any Republicans in Congress who have endorsed this provision or other specific proposals in the broader plan. Senator Scott, a possible presidential contender in 2024, was looking to differentiate himself with his policy plan and he may have done so in a way that won’t work to his (or his party’s) advantage. We do not expect Republicans to pursue such a tax increase should they regain control of the House or Senate, or the White House in 2024.

Stablecoin Legislation.

Following directives from an executive order issued by the White House in March, a variety of agencies and regulators are examining a broad span of issues posed by the emergence of digital assets. Regulators have been looking to Congress to provide direction and new authorities through legislation. However, it will be very difficult for Congress to develop a comprehensive legislative framework on these issues anytime soon. At hearings this week with Treasury Secretary Janet Yellen, leading lawmakers on both sides of the aisle expressed interest and urgency on regulation of stablecoin activities (stablecoins are digital assets issued by private entities and backed by other assets, including fiat currencies like the dollar). Regulators also are worried that stablecoins could pose liquidity and broader financial stability risks, concerns that were animated this week by volatility in the value of certain stablecoins. They have called for issuers of these coins to be regulated as banks, though Republicans and some Democrats are concerned that such a regulatory overlay could stifle innovation. Given the daylight in different approaches and the overall complexity of the issue, even a more focused legislative effort on stablecoins is probably too big a lift this year though it could ripen in the next session.

Senior Protection.

The House this week passed a bill aimed at helping combat financial fraud against seniors, a problem that costs an estimated $2.9 billion a year according to a Senate report. The bill would create a new program at the SEC that will allow the agency to augment and support state regulators’ efforts at targeting fraud and educating seniors. This issue is one of ongoing focus for Congress, which passed legislation in 2018 (called the Senior Safe Act) that provided banks and financial advisors immunity when they in good faith report potential incidences of exploitation. Given its broad bipartisan support, the bill has a shot at passing the Senate later this year.

January 6th Hearings.

The House Select Committee investigating the January 6, 2021 invasion of the US Capitol has been collecting information for almost a year on the causes and circumstances surrounding the attack. So far, the committee has conducted over 930 interviews and depositions and obtained over 100,000 documents. The committee, which is made up of seven Democrats and two Republicans has held only one public hearing (last July), which included testimony from police officers who helped defend the Capitol. Next month, the committee will hold eight public hearings throughout the month of June, beginning on June 9. These hearings will feature prominent witnesses and exhibits from the interviews and documents obtained, including from officials in the Trump administration. The committee plans to release a final report about the Capitol attack in early fall, which will be written by a hired writer in hopes to lay out the report in an easily digestible format for the public. Democrats’ main objective will be to present the findings through “blockbuster” hearings to try to regain and sustain widespread public interest in what they consider an assault on democracy. Abortion has been the bombshell issue that has rallied many Democratic voters this month, and the January 6 commission hearings and conclusions could have a similar effect in June.

Baby Blues.

Lawmakers and the Biden administration have taken note of the well-publicized shortage of infant formula in the US. In response, Congress will first do what it often does in such situations – hold a hearing. Indeed, a House committee will hold a hearing on May 25 on the issue, although there is no legislative plan to deal with the crisis at this time. The shortages (40% shortage in the US) are caused primarily by global supply chain disruptions, which are not likely to abate soon. The Food and Drug Administration is working with manufacturers of formula to increase production and to expedite its review process of formula products, but these processes will still take time. Formula needs are complex and not confined to infants. Adults with rare medical conditions require formula as well. This challenge will likely further worsen in the near term before Congress or the Biden administration can do anything to improve it.

For the Believers.

On a lighter note (for most of you), a House subcommittee will hold a hearing next week on “unidentified aerial phenomena” (UAP) for the first time in over 50 years (since 1969 when the Air Force closed a public investigation known as Project Blue Book). UAPs are what formerly were UFOs. The hearing is in response to a report requested by Congress released last June on UAPs. This nine-page “preliminary assessment” notes that the government recorded 144 incidents from 2004-2021 of UAPs that largely remain unexplained. The report helped lead to the creation of a permanent UAP research office as part of the 2021 National Defense Authorization Act, not to be confused with the secret UAP research office that already existed within the Pentagon. While the individual motivations for supporting the hearing vary quite a bit, there is no question that the interest is bipartisan with both sides of the aisle frustrated by the lack of transparency provided by various national security agencies over the unexplained incidents. While this is certainly one of the more unusual topics that Congress can cover, don’t hold your breath about finding out the secrets behind Area 51 since the Department of Defense is unlikely to reveal much information just because Congress is asking.

The Final Word

Democratic Messaging.

For almost a year and a half Democrats have taken their cue from the White House and tried to keep their messaging focused on the accomplishments of a Democratic controlled Washington (new Covid spending and infrastructure spending), coupled with an attempted “return to normalcy.” This approach appeared to be working early for much of 2021 with President Biden receiving relatively high marks in public polling. Many trends and developments have gone south since the last quarter of last year, however, and culminated this week with new messaging from the President and other Democratic leaders. In his public press conference on Wednesday, President Biden went on the offensive against Republicans, accusing them of attempting to raise taxes (see above) on the middle class and supporting an “ultra-MAGA” agenda. Democrats hope that Republicans will be put between a rock and a hard place, unable to push back on the concept lest they anger former president Trump, but also unwilling to embrace that title and risk alienating the suburban voters they hope will provide them a majority in Congress. Whether the change in tone will help Democrats come November remains to be seen, but it is at least a tacit acknowledgement that the earlier approach was no longer working.