Democrats rush to discredit CBO ahead of potentially negative report on Biden’s social-welfare bill

Congressional Democrats and the White House are rushing to discredit a looming report that will detail the cost of President Biden’s multitrillion-dollar social welfare bill and the revenue collection proposals to fund it.

As part of the effort, Democrats are engaged in a campaign to delegitimize the work of the Congressional Budget Office. They claim the nonpartisan federal agency, which is tasked with analyzing the fiscal impact of legislation, is unable to properly vet all of the provisions in Mr. Biden’s social-welfare bill.

“There’s wide agreement CBO doesn’t have experience analyzing revenue amounts gained from cracking down on wealthy tax cheats who are taking advantage of honest taxpayers,” said Andrew Bates, the White House’s director of rapid response.

Democrats further argue that the CBO’s “deficiencies” mean it is likely to find the social-welfare bill is not fully funded, contrary to what Mr. Biden has long claimed.

That position is being widely adopted among Democratic leaders, who worry that a bad CBO analysis will derail House Speaker Nancy Pelosi’s push to pass the legislation this week.

“We’re working overtime to educate members about the flaws in the CBO’s methodology,” said an aide to Democratic leadership. “Everyone has waited months for this bill to come together. A few bad cost estimates shouldn’t derail it from moving forward.”

Lawmakers fret the CBO will miscalculate the impact of the package’s tax hikes and expanded IRS enforcement.

Democrats have proposed to hire 87,000 new IRS agents to crack down on wealthy tax scofflaws. The White House argues that the expanded workforce will help to narrow the gap between taxes owed to the federal government and the amount actually paid.

The Treasury Department estimates roughly that expanded tax enforcement can net $400 billion in new revenue over the next decade. While the CBO has not officially released its estimate of the policy, most expect that it will find the $400 billion projection does not hold up.

Although that result is not yet final, allies of Mr. Biden are already casting doubt on the CBO’s accuracy.

“Appreciate CBO’s advice, but they’ve long undercounted the tax gap,” said Rep. Conor Lamb, Pennsylvania Democrat. “Without [the IRS expansion], there will be trillions in unpaid taxes this decade. Unpaid by the rich, because it’s more work to go after them and they know it.”

Phillip Swagel, the CBO’s director, contends that the attempts to discredit his agency are unfounded.

“There’s people at CBO who have been at Treasury and vice versa, so it’s a topic we’re very familiar with and have a pretty established methodology,” he said.

Despite the defense, the tactics employed by Democratic leadership to undercut the CBO seem to be working.

Some moderate House Democrats, who have refused to vote on the bill until a proper CBO review, say a lower calculation of the impact of IRS enforcement provisions is unlikely to deter their overall support.

“I think that while as a group, we’re united around the concept of seeing CBO scores,” said Rep. Stephanie Murphy, Florida Democrat. “I think each individual member will have to make their determination as to what they’re willing to accept.”

Likewise, there are strong concerns that the tax hikes in Mr. Biden’s spending bill will not generate the revenue needed to fund all of the new entitlement programs.

Treasury Secretary Janet Yellen estimates the bill will raise nearly $2 trillion over the next decade by imposing new taxes primarily on corporations and the wealthy.

The menu of tax hikes ranges from doubling the federal tobacco tax to more than $2 per pack, to a 15% flat tax on corporate profits. The latter applies to companies that publicly report more than $1 billion in profits over three years.

Also tucked into the package is a 15% tax on the foreign earnings of corporations, and a 1% surcharge on companies that buy back their own stock.

Apart from corporate tax hikes, the White House is proposing a series of taxes on the rich. Mr. Biden is backing a 5% “wealth tax” on individuals with an adjusted gross income above $10 million. The figure jumps to 8% on adjusted gross incomes over $25 million. It is estimated to raise $230 billion over the next decade.

Economic analysts say it will be impossible to estimate how much revenue will be garnered by tax hikes because many are new and have never been implemented.

The concern is shared by House Ways and Means Chairman Richard Neal, Massachusetts Democrat. Mr. Neal initially authored a wide-sweeping fiscal plan that would have repealed the Trump-era tax cuts.

The proposal, which would have boosted income and corporate tax rates across the board, was considered a non-starter by some Senate Democrats.

Since the social welfare bill will need to pass via a budget reconciliation, which allows some spending measures to avert the Senate’s 60-vote filibuster threshold and pass via simple majority, Mr. Biden opted to avoid the disunity. Instead, the White House crafted the new proposal relying on wealth and corporate surcharges.

“This considerably increases tax complexity,” said Mr. Neal.


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