Business emerges as winner in framework deal5 min read
Business interests are emerging as winners in President BidenJoe BidenWhite House unveils strategy for 2050 net-zero goal Southwest investigating report pilot said ‘Let’s go Brandon’ on flight House Rules Committee won’t meet Monday on reconciliation package MORE’s social spending and climate plan unveiled Thursday.
The White House proposal to invest in clean energy, child care, education, housing and other Democratic priorities has sparked an unprecedented lobbying blitz from corporate America and other advocates.
Across industries, business groups successfully pushed lawmakers to make significant changes to key sections of the original $3.5 trillion bill. Their lobbying efforts revolved around Sens. Joe ManchinJoe ManchinWhite House unveils strategy for 2050 net-zero goal Biden sets off high-stakes scramble over spending framework Buttigieg twins dress as ‘twinfrastructure’ for Halloween MORE (D-W.Va.) and Kyrsten SinemaKyrsten SinemaBiden sets off high-stakes scramble over spending framework Officials, lawmakers express optimism that infrastructure, spending vote is near Buttigieg on passing spending packages: ‘We are the closest we have ever been’ MORE (D-Ariz.), who ultimately sided with the business community on several issues.
Retailers, drugmakers, private insurers and clean energy firms have emerged as some of the biggest winners.
The White House plan does not raise tax rates on corporations — keeping a central part of the GOP’s 2017 tax cuts intact — in a stunning win for business interests.
Business groups deployed hundreds of lobbyists to Capitol Hill and aired dozens of targeted ad campaigns urging moderate Democrats to reject tax increases, which they argued would hurt the nation’s economic recovery.
Lobbyists expected that Democrats would ultimately raise corporate taxes from 21 to 25 percent. Those plans fell apart last week after Sinema said she wouldn’t support any rate increases.
“If you had asked most of my clients, nobody was going to bet on no corporate rate increase,” Rich Gold, a partner at Holland & Knight, said in a recent interview.
Retailers, which successfully pushed Democrats to keep the 21 percent corporate tax rate intact, increase IRS enforcement and implement a minimum corporate tax on companies that avoid federal taxes, emerged as one of the biggest winners.
Democrats’ proposed minimum tax won’t hurt most retailers, which generally don’t benefit from as many tax breaks as other industries.
“We are pleased the President’s framework rejects a rate increase, and instead focuses on the disparities of the current system which allow many highly profitable companies to pay no corporate tax while retailers pay full freight,” said Hana Greenberg, vice president of tax at the Retail Industry Leaders Association. “This direction represents a more equitable approach to the tax code, which is exactly what leading retailers have advocated for throughout the year.”
Other business groups don’t support the 15 percent minimum tax, which will apply only to corporations with $1 billion or more in annual profits. Under the plan, the nation’s most profitable companies will no longer be able to avoid all federal taxes by taking advantage of lucrative deductions and deferments.
“Last year, the 55 most profitable corporations in America paid zero in federal income tax on about $40 billion in profit,” Biden said Thursday. “If they report big profits to their shareholders, they should be paying taxes. It’s that simple.”
The framework includes a 1 percent surcharge on stock buybacks and a global minimum tax that is opposed by some large, multinational corporations.
“We remain concerned that a multi-trillion tax and spend bill will lead to greater near-term inflation, reverse our economic recovery, put U.S. companies at a competitive disadvantage, and weaken economic growth and job creation going forward,” Neil Bradley, executive vice president and chief policy officer at the U.S. Chamber of Commerce, said in a statement.
Pharmaceutical industry, private insurers
The initial framework does not include Democrats’ bill to allow Medicare to negotiate drug prices, a key measure that many Democratic lawmakers campaigned on in 2018 and 2020.
The pharmaceutical industry went all-out to defeat the proposal, airing multiple seven-figure ad campaigns and spending nearly $263 million on lobbying through the first three quarters of 2021, a record high, according to OpenSecrets. Drugmakers said that the bill would hurt their ability to introduce new cures by reducing their revenue.
Multiple Democratic senators and several House Democrats in pharma-heavy districts opposed their party’s proposal. Those lawmakers, led by Sinema, are pushing for a more targeted approach that focuses on lowering out-of-pocket drug costs, namely insulin.
“Our understanding is this is a framework,” said Brian Newell, a spokesperson for the Pharmaceutical Research and Manufacturers of America. “We continue to stand ready to work with policymakers this year to enact meaningful reforms that will lower out-of-pocket drug costs for patients.”
The drug pricing omission has drawn fierce criticism from progressive lawmakers and groups representing seniors and patients.
“We are outraged that the initial framework does not lower prescription drug prices,” Nancy LeaMond, executive vice president and chief advocacy and engagement officer at AARP, said in a statement. “It would be a monumental mistake for Congress not to act on an historic opportunity to improve the lives of virtually every American family.”
The plan expands Medicare to cover hearing but not dental and vision, which drew pushback from Manchin and Sinema. Private insurers, which make significant profits providing those benefits under Medicare Advantage, lobbied against the proposal.
Instead of growing government-run programs, the bill will expand health insurance and reduce premiums by subsidizing private insurers under the Affordable Care Act, the route that insurers pushed Democrats to take.
Clean energy, climate groups
The framework invests $555 billion to fight climate change, including $320 billion for clean energy tax credits, $130 billion for renewable energy development and $105 billion for environmental resilience to combat extreme weather events.
Climate measures make up the largest piece of the package, outpacing other huge investments in child care, preschool, housing and child tax credits.
“If passed, the Build Back Better framework would be the largest climate investment in American history,” Evergreen Action Executive Director Jamal Raad said in a statement. “This package truly can be transformative in confronting the climate crisis, advancing environmental justice, and creating millions of good jobs building our clean energy future.”
The framework is a huge win for clean energy groups, which were concerned that climate measures would be watered down after Manchin announced that he wouldn’t support Democrats’ Clean Electricity Performance Program. Democrats say they can reach their climate goals without the program, which would have provided financial incentives for electric utilities to drop fossil fuels.
“For the sake of our climate, the economy and American workers, the solar industry is urging Congress to come together and pass this momentous legislation as soon as possible,” Abigail Ross Hopper, president and CEO of the Solar Energy Industries Association, said in a statement.
Green groups are upset about one provision that provides grants, rebates and loans to fossil fuel companies to reduce methane emissions. The original bill would have enacted a fee on methane emitters, but the measure was scrapped after oil and gas producers successfully lobbied Texas Democrats to oppose it.