Senate Democratic Leader takes Tax Increases off the Table in Debt Debate

February 7, 2023

Senate Majority Leader Chuck Schumer (D-NY) on February 7th took off the negotiation table tax increases in conjunction with raising the debt ceiling.

“The debt ceiling should be done without brinksmanship, without hostage taking, without confrontation,” Schumer told reporters, adding "I’d like to see [tax increases] on the table, but not as a demand that unless we get [tax increases] done we’re not going to pass the debt ceiling.” 

Schumer, as well as the Biden Administration, have called for a “clean” increase in the debt ceiling, meaning that the federal government’s borrowing limit will be raised without contingencies, i.e., raising the limit would be dependent on spending cuts or tax increases also being enacted.

House Speaker Kevin McCarthy (R-Calif.) wants to tie a debt ceiling increase to enacting spending cuts.

"A responsible debt limit increase that begins to eliminate wasteful Washington spending and puts us on a path towards a balanced budget is not only the right place to start. It’s the only place to start,” McCarthy said on Monday night.

Debt ceiling negotiations are expected to last months. Over this time-period, leader positions are likely to shift – if history is any guide. In 2013, Democratic leaders called for a “clean” increase in the debt ceiling while Republican leaders urged for spending cuts to accompany the increase.

After several rounds of negotiations, leaders agreed to suspend the debt ceiling – which meant it wasn’t raised. The debt ceiling simply didn’t exist for a certain time period, allowing the federal government to issue debt without fear of crossing the limit.

Tax increases could return to current debt ceiling negotiations if McCarthy’s call for spending cuts gains momentum. Democrats will urge for tax increases if spending cut talks get serious.  

If negotiations move in the spending-cuts/tax-increase direction, it is hard to see a resolution happening on increasing the debt ceiling. Democrats (who are in the Senate Majority) will oppose spending cuts. Republicans (who are in the House Majority) will oppose tax increases.

Next Stop, Budget:

Senator Schumer said that tax increases and spending cuts should be a part of the budget that he hopes Congress will pass this year.

“The idea of where there should be spending cuts and where there should be tax increases belongs in the budget,” he said.

President Biden is expected to kick-off budget discussions in March when he delivers his budget to Congress. The document is expected to propose tax increases on wealthier taxpayers and businesses. Schumer supports such tax increases.

“I agree that there are too many ultra-rich people, too many corporations – even after the IRA [Inflation Reduction Act] – don’t pay their fair share of taxes,” he said.

A budget that includes tax increases is highly unlikely to pass the Republican-controlled House.

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