Evan Vucci/AP Photo
President Biden speaks during an event on the American Jobs Plan in the South Court Auditorium on the White House campus, April 7, 2021.
President Biden is proposing to spend $2 trillion on physical and human infrastructure, and more in additional waves of social investment. He wants to pay for this with some $2 trillion in revenue increases over 15 years, which will cover the costs of the spending, and then begin to reduce deficits.
But some Democrats, notably Joe Manchin, are balking at some of the tax hikes. In addition, more spending is still to come, especially for the caring economy.
We need some alternatives to increases in tax rates. Here are several revenue raisers that don’t increase tax rates and also are good policy on their own terms:
Allow Medicare to negotiate drug prices. According to a recent GAO report, Medicare pays more than twice what the VA does for prescription drugs. Medicare is explicitly prohibited from bargaining for wholesale prices by the Republican-sponsored legislation that created privatized Medicare drug plans. If Medicare could negotiate bulk discounts as the VA does, it could save at least $400 billion over 15 years.
Increase tax compliance, especially of the wealthiest tax evaders. Because of the demonization of the IRS, Republican presidents and Congresses keep reducing IRS personnel. Meanwhile, tax evasion maneuvers get ever more complicated. Experts estimate we could raise $100 billion a year, or $1.5 trillion over Biden’s 15-year horizon.
In other words, negotiated drug prices plus increased tax enforcement roughly equals the sum that Biden hopes to raise through increased tax rates. And here is one more idea:
Fifty-year infrastructure bonds. Biden has agreed that the next round of spending needs to be paid for. But we could make a partial exception with special 50-year infrastructure bonds that would take advantage of today’s very low interest rates and lock in low borrowing costs for government. If 50-year bonds covered, say, one-fifth of the cost, that’s another $400 billion we don’t need to raise with increased tax rates.
Over to you, Sen. Manchin.