Business groups aim to divide Democrats on $3.5T spending bill

Business lobbyists are increasingly optimistic that they can water down tax hikes and other measures in Democrats’ $3.5 trillion spending plan opposed by corporate America.

Their confidence was boosted last week by an agreement struck between Speaker Nancy Pelosi (D-Calif.) and 10 centrist House Democrats that ensures a Sept. 27 vote on the bipartisan $1 trillion infrastructure bill passed by the Senate earlier this month.

By agreeing to a stand-alone vote, Pelosi softened her stance that both bills must be passed together, a priority for progressives in her caucus. Business groups see that as a huge win, believing that progressives will lose some leverage over components of the reconciliation package if the House passes the $1 trillion infrastructure bill first.

U.S. corporations broadly support the bipartisan bill that would create new spending on roads, bridges, broadband and water without raising taxes on businesses. But they oppose the tax hikes that would pay for the $3.5 trillion party-line proposal, which would ramp up spending on child care, education and climate change mitigation.

Industry lobbyists are confident they can chip away at the planned corporate tax increases and make significant changes to a Democratic proposal to overhaul international taxes on multinational corporations, arguing in both cases that such provisions would slow the U.S. recovery from the coronavirus recession.

K Street is also eager to flex its muscle on Democratic plans to expand Medicare, increase taxes on capital gains, eliminate tax deductions for fossil fuels and allow the government to negotiate drug prices.

“The business community has made progress with certain Democrats on legitimate policy concerns with some of these proposals and their implications on the economy and international competitiveness,” said a lobbyist with ties to Senate Democrats. “A lot of those arguments are landing.”

Business interests have Democratic allies in Sens. Joe Manchin (W.Va.) and Kyrsten Sinema (Ariz.) and the group of House moderates led by Rep. Josh Gottheimer (N.J.) — all have expressed concerns about the size of the spending plan and potential tax hikes.

Only a handful of defections among House Democrats — or just one in the 50-50 Senate — would doom the reconciliation package.

The U.S. Chamber of Commerce, which placed digital ads backing the moderates as they took fire from other House Democrats, applauded the efforts by centrists to “decouple” the $1.2 trillion and $3.5 trillion bills.

The Chamber and other business groups are preparing for potential progressive opposition to the infrastructure bill when it comes up for a House floor vote. In doing so, they’re rounding up GOP support for the measure to boost its chances of landing on President Biden’s desk.

“Anyone who needlessly delays or tries to kill this bill is holding back our nation,” Suzanne Clark, president and CEO of the Chamber of Commerce, said in a statement last week. “I don’t know how anyone could go home and explain to their constituents that they voted to block money to fix a crumbling bridge or to replace lead water pipes running into schools.”

Progressives have insisted that the House must first pass the party-line reconciliation package before approving the Senate-passed infrastructure bill.

“We’ve been very clear and very consistent from the beginning that the only way that this infrastructure plan has a chance is if reconciliation comes through,” Rep. Alexandria Ocasio-Cortez (D-N.Y.) said last week, adding that she believes the infrastructure bill won’t get enough GOP votes to cancel out progressives.

Big business may have time on its side. To beat the Sept. 27 deadline, Democrats will need to act quickly to finalize a reconciliation package that satisfies both progressives and moderates. Those efforts will come at a time when Congress also needs to pass government spending bills to avoid an Oct. 1 shutdown, not to mention the looming debt ceiling debate.

“[House Democrats] are probably going to blow by that September date,” said a lobbyist who used to work for House Republicans. “There is just too much on their plate right now.”

Pelosi last week committed to rallying Democratic support for the infrastructure bill. She added that the House would need to pass the measure by Sept. 30 anyway, as some surface transportation programs are set to expire on that date.

Those factors might make it difficult for a large number of progressives to vote against the $1 trillion infrastructure bill, especially if the larger party-line package isn’t close to being ready, business lobbyists said.

Democratic committee chairs have begun working out the details of the $3.5 trillion spending plan, but the process is still very much in the early stages.

Senate Finance Committee Chairman Ron Wyden (D-Ore.) unveiled a draft international tax plan Wednesday that would enact stricter penalties on companies shifting jobs and profits overseas. He did not say what tax rate corporations would pay.

Lobbyists expect Democrats to raise the top corporate tax rate from 21 percent to 25 percent. That’s lower than the 28 percent rate proposed by Biden, but right in line with what Manchin said he’d be comfortable with.

Other revenue raisers are being targeted by monied interests, threatening to drastically reduce the size of the final bill if Democrats cut them out.

A “dark money” group run by former Sen. Heidi Heitkamp (D-N.D.) announced a six-figure ad campaign Friday opposing Democrats’ proposal to tax capital gains at death, a key source of funding for the spending plan.

The pharmaceutical industry is fighting a proposal that would allow Medicare to negotiate the price of prescription drugs, which would save the federal government $456 billion over a decade, according to the Congressional Budget Office.