Senate Infrastructure Bill Drops IRS Funding, Raising Pressure for New Revenue

Lawmakers have dropped plans to help fund a roughly $1 trillion infrastructure package by boosting tax-collecting enforcement at the Internal Revenue Service, according to a key negotiator, adding new difficulties to funding the bipartisan measure ahead of a looming deadline for agreement.

Republican opposition is a main reason that financing for more IRS enforcement is no longer a part of the infrastructure proposal, said

Sen. Rob Portman

(R., Ohio) on CNN Sunday. He cited pushback from some lawmakers who warn of intrusive government overreach. That has cast new uncertainty over the plan days ahead of a midweek vote planned by Senate Democratic leaders.

But Mr. Portman said the sudden funding shortfall wasn’t necessarily a blow to the overall package, adding that there were other potential revenue sources for the infrastructure plan, such as a Medicare rebate rule.

“We have a number of pay-fors,” Mr. Portman said. “And that’s important, that it be paid for.”

Republicans and Democrats have spent weeks trying to negotiate an infrastructure deal but have grappled with how to cover the cost while minimizing the impact on the federal deficit, which has soared to record levels over the past few years, due to big tax cuts and pandemic-related spending.

Lawmakers face the first test this week of whether there will be enough support to move forward with the infrastructure deal, along with a $3.5 trillion budget resolution supported only by Democrats to further other parts of President

Biden’s

agenda, such as expanding clean energy and healthcare. The two interlocking pieces of legislation together comprise most of the White House economic plan.

Senate Majority Leader

Chuck Schumer

(D., N.Y.) said last week that he will take the first procedural step Monday, setting up a vote Wednesday to begin debate on the bipartisan infrastructure bill. Democratic support for the infrastructure legislation, however, depends on the party coalescing by the same day around the $3.5 trillion budget resolution.

The $1 trillion bipartisan infrastructure package and the $3.5 trillion Democratic healthcare and antipoverty plan will face obstacles as they make their way through Congress in tandem. WSJ’s Gerald F. Seib explains. Photo illustration: Laura Kammermann

Both bills rely on fragile coalitions of lawmakers deciding to compromise. Republicans and Democrats were still hammering out key details over the weekend of how they would pay for the roughly $1 trillion infrastructure bill and said they weren’t sure if they would meet the midweek deadline.

Sen. Bill Cassidy

(R., La.) said on Fox News Sunday that meeting the Wednesday deadline was possible but only if the negotiators agreed on pay-fors for the plan.

“We need Senate leadership, Schumer, and the White House to work with us. Right now, I can—I can frankly tell you that they’ve not,” Mr. Cassidy said. “We’re competing with their $3.5 trillion plan. They want everything reasonable on their side, not helping us.”

Mr. Portman, the lead GOP negotiator on the infrastructure deal, said negotiations were ongoing and that they shouldn’t have a Wednesday deadline.

“It’s more important to get it right than to meet an arbitrary deadline,” he said.

The group of 11 Republicans and 11 members of the Democratic caucus reached a deal on a broad framework with the White House last month, but some said they wouldn’t vote to begin debate on the bill unless a more detailed agreement had been reached. Late last week, disagreements over adding money to the IRS budget to beef up its collection of unpaid taxes tripped up lawmakers hoping to finalize how the bill’s cost would be offset.

“We want to be able to collect the taxes that are due, but we also don’t want to harass individuals—and in between is a fine line we don’t want to cross,” said

Sen. Mike Rounds

(R., S.D.), a member of the bipartisan group.

Sen. Bernie Sanders has sought as much as $6 trillion for spending in the infrastructure package, including antipoverty legislation.



Photo:

Kevin Dietsch/Getty Images

Lawmakers had said last week that they were looking to see if they could replace the IRS enforcement provision with another way of paying for the bill, but are constrained by Republicans’ refusal to raise taxes and Democrats’ unwillingness to raise user fees on lower and middle-income Americans.

The infrastructure bill will need 60 votes to advance in the 50-50 Senate, where liberal Democrats have said their support is contingent on the separate antipoverty and climate package securing unanimous support within their party. Democrats plan to advance the $3.5 trillion package through a process tied to the budget that allows it to skirt the 60-vote requirement and pass with a simple majority, provided that they stave off any defections within their own ranks.

Senate Budget Committee Chairman

Bernie Sanders

(I., Vt.) had initially pressed for a $6 trillion package and some centrists including Sens.

Joe Manchin

(D., W.Va.) had hoped for a bill no larger than $2 trillion. Under a framework reached by the Democrats on the Budget Committee last week, including Mr. Sanders, the $3.5 trillion package would combine expanded access to preschool and affordable child care, broader Medicare benefits and programs aimed at combating poverty and climate change.

Mr. Manchin and some other centrist Democrats said last week that they needed to review more details of the agreement before committing to support it. Sen.

Jon Tester

(D., Mont.) said late last week that he would support at least moving forward with the process of crafting the budget resolution. Mr. Schumer said Senate Democrats have until Wednesday to decide whether they can coalesce around it.

“We need to address some very important issues in this country and I think there’s a real possibility that that $3.5 trillion can address some of those issues that aren’t addressed in this bipartisan infrastructure package,” Mr. Tester told reporters. “So I want to have a debate on it.”

House Speaker

Nancy Pelosi

(D., Calif.) has said she won’t bring up the bipartisan infrastructure bill until the broader budget package has passed the Senate, leading to some backlash from both sides.

“We urge our colleagues to support an alternative approach and recognize that supporting an infrastructure bill that authorizes new spending also enables the Democrats’ $3.5 trillion tax-and-spend budget,” a group of nine conservative Senate Republicans said in a statement Thursday.

Meanwhile, some centrist House Democrats are urging Mrs. Pelosi to bring up the bipartisan infrastructure bill as soon as it passes the Senate.

“We strongly urge—and pledge to work with you to bring about—a House vote on this legislation before the August recess and without any unnecessary or artificial delay upon arrival from the Senate,” a group of 10 House Democrats said in a letter released Thursday.

Biden’s Infrastructure Plan

Write to Sarah Chaney Cambon at [email protected] and Kristina Peterson at [email protected]

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