Washington leaders who are debating the fate of the debt ceiling have either expressed the need for or passed legislation that couples tax increases with the federal government’s borrowing authority.
President Joe Biden this week said that tax increases should be a part of the discussion in raising the debt ceiling.
“I think we should be looking at tax loopholes and making sure the wealthy pay their fair share. I think revenue matters as well as -- as long as you're not taxing anybody under 400,000 bucks,” Biden told reporters on May 22nd.
Congressional Democrats proposed tax increases on cryptocurrency and large pieces of real estate by making swaps taxable for each. Republicans rejected their proposal.
House Majority Leader Steven Scalise (R-La.) told reporters on May 23rd that his party would not accept tax increases being included in debt ceiling negotiations.
“The President is actually talking about more tax hikes,” Scalise said. “We made it very clear from the beginning: We’re not going to raise taxes.”
Scalise’s remarks conflict with reporting that the House-approved debt ceiling bill, the Limit, Save, Grow Act of 2023, would increase taxes if it became law.
You’ve probably heard about the Limit, Save, Grow Act of 2023 (LSG, H.R. 2811), which narrowly passed the House of Representatives last month… You can’t help but notice that the debt reductions contained in the LSG package aren’t limited to the spending side. The bill would roll back some tax breaks that Democrats favor, specifically the clean energy tax credits that were expanded or created under the IRA [Inflation Reduction Act]. Some of those tax credits relate to the purchase of electric vehicles; others relate to the installation of solar panels that lessen demands on local energy grids.
More from Goulder:
Make no mistake: The repeal of a tax break (even one created by the opposing party) qualifies as a tax increase.
House Republicans approved their debt-ceiling bill on April 26th. In a normal world, this piece of legislation would be considered to increase taxes. It reduces or eliminates tax deductions or credits, which would increase a taxpayer’s tax bill. Ergo, a tax increase.
Republicans are referring to the bill they passed as containing spending cuts, which is actuate. But their bill also includes tax increases.
The Joint Committee on Taxation (JCT) is tasked on Capitol Hill with reviewing tax legislation and calculating how its provisions will change the Internal Revenue Code.
The JCT concluded that the Republican-passed bill would raise over $515 billion in revenue between 2023 and 2033. This revenue comes from tinkering with the Internal Revenue Code, and includes:
- Repealing the increase in energy tax credits for solar and wind,
- Repealing the sustainable aviation fuel tax credit,
- Repealing tax credits for production of clean hydrogen,
- Repealing the tax credit for previously-owned clean vehicles,
- Repealing the advanced manufacturing production tax credit,
- Repealing the clean fuel production tax credit.
The Senate, which is controlled by Democrats, is not expected to vote on the House-passed Limit, Save, Grow Act of 2023. This means that the tax increases included in the bill are unlikely to become law.
However, until Democrats put forward a proposal for how they would like to address the debt ceiling issue, the House-passed bill remains on the negotiation table.