The Biden White House and Senate Majority Leader Charles Schumer, D-N.Y., are negotiating with West Virginia Democrat Sen. Joe Manchin to pass a slimmed-down version of the failed Build Back Better bill, a sweeping multi-trillion-dollar domestic policy and spending package that collapsed last December over the objections of Manchin and Arizona Sen. Kyrsten Sinema, D.
A less ambitious bill would likely include a tax increase on so-called pass-through businesses to generate revenue to shore up a Medicare trust fund. Pass-through business is the term sometimes applied to small businesses whose revenue “passes through” to the owner and is taxed at the individual rate rather than the corporate rate.
The revised bill would also attempt to lower prescription drug prices through a new Medicare price negotiation scheme and would include policies to address climate change.
Arizona and the country’s business community are viewing this version of the bill with the same skepticism they viewed last year’s version.
“This plan to implement a Small Business Surtax is a direct attack on Main Street when they can least afford it,” said Kevin Kuhlman, NFIB vice president of federal government relations. “With excessive inflation, high gas prices, worker shortages, and supply chain disruptions, a tax increase dishonestly masked as closing a ‘loophole’ or ‘funding Medicare’ is not only problematic, but it could also trigger a small business recession that would have a devastating impact on economic recovery.”
While smaller in size and scope than the bill originally proposed in 2021, Senate Republicans are united in opposition to it, which means Senate Democrats would have to adhere to that chamber’s strict reconciliation rules to pass the bill with a simple majority, rather than the 60 votes necessary to cut off a filibuster.
Senate Minority Leader Mitch McConnell, R-Ky., said that if Senate Democrats attempt to pass such a bill under reconciliation his caucus would respond by withholding support for a bill to bolster U.S. competitiveness with China, which includes provisions to spur increased domestic production of semiconductors.
Arizona Chamber of Commerce & Industry President and CEO Danny Seiden said Senate Democrats’ gambit could have serious consequences.
“This attempt to use the Senate reconciliation rules to jam through a tax increase on small businesses couldn’t come at a worse time, especially for Arizona job creators,” he said. “We’re living through record-high inflation and we’re in the middle of a supply chain crunch that has exacerbated a semiconductor shortage. There’s a chance to get a bill done to boost chip production, but Chuck Schumer seems willing to put all that at risk.”
In a letter to President Biden and congressional leaders sent Tuesday, National Association of Manufacturers President and CEO Jay Timmons said Congress should focus on passing the China competitiveness bill.
“There is absolutely no reason to delay or derail legislation that has earned bipartisan support and would support American manufacturing workers for decades to come. The longer we wait, the further behind we fall,” Timmons said.
Seiden says the bill’s rumored drug price controls will also face stiff opposition from the business community.
“Here we go again with yet another attempt to stifle the research and development of lifesaving pharmaceuticals,” he said. “These sorts of price control proposals will harm the very people lawmakers on Capitol Hill claim to want to help.”
While Manchin appears to be willing to vote for a tax increase, Sinema earlier this year took a dim view of tax increases in response to a question about attempts to revive the failed Build Back Better bill.
Speaking at the Arizona Chamber’s Update from Capitol Hill Luncheon in April, Sinema said, “What I can promise you is that I’ll be the same person in negotiations if they start again that I was in negotiations last year.” She also said she would oppose “any tax policies that would put a brake on any type of economic growth or forestall business and personal growth for America’s industries.”
Seiden said he’s hopeful Sinema will maintain that position.
“Sen. Sinema has proven that the Senate can still accomplish big things on a bipartisan basis,” he said. “Arizona’s job creators will look to her to once again stop the Senate’s rules from being used to advance a hyper-partisan agenda. We hope her colleagues will turn their attention to the competitiveness bill and drop any plans to tax small businesses and smother innovation.”