Democrats may leave a tax loophole billionaires love untouched. Closing it would dent the fortunes of Jeff Bezos and Elon Musk.

SpaceX founder and Tesla CEO Elon Musk/President Joe Biden/Amazon founder and CEO Jeff Bezos

  • Democrats can’t decide whether to close a tax loophole that’s popular with the wealthiest Americans.
  • The “step-up basis” loophole lets billionaires pass down investment gains without paying any taxes.
  • Here’s how the loophole works, and why Democrats are split on whether to close it.
  • See more stories on Insider’s business page.

Democrats face a looming deadline to pass an infrastructure package before the end of September – and they’re still squabbling over how to pay for it.

Many of the solutions are simple. House Democrats and the Biden administration both support higher taxes on rich Americans and corporations. But one particular tax issue – the “step-up basis” – sits at the center of their hemming and hawing.

It has to do with how, when Americans sell assets like stocks or bonds, they pay a capital gains tax on their earnings. If someone bought a stock for $100 and sold it for $250, they’d pay taxes on the $150 profit.

Through the step-up loophole, however, those charges can be dodged entirely. If an investor transfers assets when they die, the inheritor receives them without a capital-gains tax burden. It’s also an easy way to dodge the estate tax. While estates are taxed when they’re transferred after the owner’s death, gifts – like unrealized gains from assets -aren’t.

Understanding the loophole of a ‘step up’ in value

The term “step-up” refers to the difference in value and tax liability that an asset has when it is acquired and when it is transferred to an inheritor.

The proverbial billionaire Jerry, for example, could buy a home for $250,000 and sell it for $1 million, after which he’d pay taxes on the $750,000 gain. But if Jerry passes the home onto his daughter Ella, and she has it appraised at $1 million, its value has taken a “step up” in value to $1 million. If Ella sells the home for $1 million or less, she wouldn’t owe anything in taxes.

For billionaires like Jeff Bezos and Elon Musk who earn far more through their investments than their salaries, this loophole is a perfect way to shield their wealth. Intergenerational wealth has contributed to surging inequality in America, which grew wider during the pandemic. Since 2019, the wealth of the top 400 richest people in the US increased by $1.4 trillion, per research from Gabriel Zucman and Emmanuel Saez, a pair of left-leaning economists at the University of California, Berkeley.

“Often, for these people, wealth accumulates tax-free their entire lives,” Frank Clemente, executive director at the left-leaning advocacy group Americans for Tax Fairness, told Insider. President Joe Biden proposed ending this loophole and making billionaires “pay their fair share,” so why does it look like his party won’t touch it?

Democrats split on hitting the rich where it hurts

Biden wants inheritors to pay taxes on gains larger than $1 million for single filers and $2.5 million for couples. Coupling that with a higher capital gains tax rate could raise more than $320 billion over the next decade, the White House said.

This week, the House Ways and Means Committee released tax proposals that would tax the rich more, including raising the top income tax rate to 39.6% and boosting the top capital gains tax rate to 25%. Left out of this framework, though, was an end to the step-up basis.

“The [Ways and Means] proposal fails to end the ability of the wealthiest filers to go through life without paying any taxes on the vast bulk of their incomes from assets, and this should be revisited as the reconciliation process continues,” Chye Chin Huang, executive director of the Tax Law Center at New York University, wrote on Twitter,

The Senate hasn’t released its own tax framework, but it is considering eliminating the loophole. “I feel very strongly that yearly, billionaires who did extraordinarily well in the pandemic should make tax payments like nurses or firefighters,” Sen. Ron Wyden of Oregon, chair of the Senate Finance Committee, told Insider.

Wyden will probably have to contend with moderates in the Senate, namely Joe Manchin and Kyrsten Sinema, just as moderates in the House have balked at closing the step-up loophole. If the moderates’ proposals prevail, the wealthy will likely continue to park their cash in assets with little financial consequence.

Closing step-up “is the one thing in the Biden plan that does get at wealth accumulation,” Clemente said. “For the really wealthy folks, they’re not going to have to cash out, so they won’t pay the tax anyway.”

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AOC vows progressives will ‘tank’ the bipartisan infrastructure bill if a reconciliation bill including more care-economy and climate change measures isn’t passed in tandem

alexandria ocasio cortez
Rep. Alexandria Ocasio-Cortez, D-N.Y.

  • Biden’s bipartisan infrastructure deal cut out a number of care-economy measures from his initial plan.
  • AOC said progressive will “tank” the deal if a reconciliation bill isn’t passed at the same time.
  • The reconciliation bill would include more care-economy measures and climate change initiatives.
  • See more stories on Insider’s business page.

After President Joe Biden reached an agreement with a bipartisan group of senators on an infrastructure plan, many Democrats criticized how the deal cut out many care-economy measures, like eldercare and affordable housing.

Rep. Alexandria Ocasio-Cortez of New York doubled down on those criticisms on Thursday, promising that progressives will “tank” the deal unless a separate bill, full of care-economy measures, makes the cut, too.

Senate Democrats announced on Tuesday they had reached such a deal which they hope to pass in tandem with the infrastructure package through a political process known as reconciliation, which just requires a simple majority vote.

“House progressive are standing up…” Ocasio-Cortez said during a town hall. “We will tank the bipartisan infrastructure bill unless we also pass the reconciliation bill.”

On June 24, Biden announced he had reached an agreement on an infrastructure plan with the bipartisan group of senators after weeks of negotiations, ending up with a plan that was just under $1 trillion – cutting over a half of the president’s original price tag. This led many Democrats, including Speaker of the House Nancy Pelosi, to say that in order to win their support for the bipartisan deal, a reconciliation bill must be passed alongside it to get needed care-economy measures to the American people.

“There ain’t going to be an infrastructure bill unless we have the reconciliation bill passed by the United States Senate,” Pelosi told reporters at the time.

Biden even said during a press conference after announced the agreement that the infrastructure deal and a reconciliation bill would work “in tandem,” but he later walked back those comments following fierce opposition from Republican lawmakers.

But progressive lawmakers are still pushing for a reconciliation bill that they believe is urgent to meet the needs of the country, including addressing the climate crisis, and their promise to shut down the bipartisan deal if the reconciliation bill isn’t passed at the same time imposes difficulties for the deal’s future.

“If [Senate Dems] try to strip immigration reform, if they try to claw back on child care, climate action, etc., then we’re at an impasse,” Ocasio-Cortez said. “It’s a no-go.”

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Exxon lobbyist pressured lawmakers to remove climate measures from Biden’s initial $2 trillion infrastructure plan, report says

exxonmobil refinery oil
A view of the ExxonMobil refinery in Baytown, Texas September 15, 2008.

  • An Exxon lobbyist reportedly pushed for Congress to cut climate measures from the infrastructure plan.
  • He said in a recording he lobbied key senators to take climate provisions out of Biden’s $2 trillion plan.
  • Biden has since reached an agreement with a bipartisan group that cut out many climate provisions.
  • See more stories on Insider’s business page.

Whether to include climate provisions in an infrastructure plan has been a major point of contention between Republican and Democratic lawmakers. But new recordings reveal outside influences may have also had a hand at determining the role climate should play.

The UK’s Channel 4 News obtained recordings from Unearthed, Greenpeace UK’s investigative platform, that showed a lobbyist for oil and gas giant ExxonMobil, Keith McCoy, saying the company had fought legislative action on climate change. He was talking on a Zoom call in which Unearthed investigators posed as headhunters looking to hire a lobbyist for their client.

McCoy said he had lobbied key senators to remove or diminish climate change measures from President Joe Biden’s original $2 trillion infrastructure proposal, and he added that ExxonMobil had joined “shadow groups” to pursue climate change denial.

“Why would you put in something on emissions reductions on climate change to oil refineries in a highway bill?” McCoy said in the recording. “So, people say, ‘Yeah, that doesn’t make any sense,’ so then you get to the germane of saying that shouldn’t be in this bill.”

In a lengthy statement to Channel 4 News, ExxonMobil said that Greenpeace has waged a “multi-decade campaign” against the company, which has included “false claims and unlawful actions” at the company’s facilities.

“We have supported climate science for decades,” ExxonMobil said in the statement. “Greenpeace and others have distorted our position on climate science and our support for effective policy solutions.”

McCoy also said that ExxonMobil’s public support for a carbon tax lies under the assumption that the carbon tax will never happen, allowing the company to support the tax to appear green. The company responded to that claim in its statement by saying it has been “clear in supporting an efficient, economy-wide price on carbon.”

These recordings come after Biden reached an agreement with a bipartisan group of senators on a new infrastructure plan that is more than half of his initial proposal, with many climate-related measures cut out. For example, as Insider previously reported, $213 billion for affordable, green housing was cut from the plan, along with $35 billion in climate research.

That’s why many Democrats are calling for the bipartisan deal to be passed alongside a reconciliation bill that would include the care-economy measures cut, like affordable housing and free community college, along with substantial climate-related measures.

“I’ve said all along: no climate, no deal,” Democratic Sen. Ed Markey wrote on Twitter last week. “The bipartisan framework doesn’t get us there. So I agree with our leadership that this must be resolved in reconciliation. Until then, I’m still no climate, no deal – let’s get this done.”

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Biden seizes on extreme weather to tout infrastructure: ‘We gotta make lemonades out of lemons here’

President Joe Biden.
President Joe Biden.

  • Extreme heat is hitting the west coast as experts see increased wildfire potential for the region.
  • Biden met with western governors to tout his infrastructure plan as a remedy to the climate crisis.
  • “We gotta make lemonades out of lemons here,” he told lawmakers about climate change.
  • See more stories on Insider’s business page.

Extreme heat is hitting the west coast just as wildfire season is approaching, and experts predict above-normal fire potential for much of the region, which could have devastating impacts.

The record heat wave has melted power cables in Portland and hospitals in the west are seeing an influx of patients due to heat, prompting President Joe Biden and Vice President Kamala Harris to meet with western governors to discuss best methods for wildfire preparation and prevention.

Biden said his bipartisan infrastructure deal could be part of the solution.

“We gotta make lemonades out of lemons here,” Biden said during a Wednesday roundtable with Western governors. “We have a chance to do something that not only deals with the problem today, but allows us to be in a position to move forward – and create real good jobs, by the way, generate economic growth.”

Last week, Biden reached an agreement with a bipartisan group of senators on a near $1 trillion infrastructure proposal, including $579 billion in new spending largely focused on rebuilding physical infrastructure. But as Biden noted during the roundtable, the plan also includes $50 billion to build resilience to extreme weather events, like wildfires, along with increasing firefighter pay to $15 an hour to ensure they are “fairly paid for the grueling work they are willing to take on,” according to a White House fact sheet.

Although Biden is promoting the bipartisan deal as a climate remedy, Democratic lawmakers have criticized the plan for cutting many climate-related elements out of the president’s initial proposal. For example, as Insider previously reported, $213 billion for affordable, green housing was cut from the plan, along with $35 billion in climate research.

That’s why many Democrats are calling for the bipartisan deal to be passed alongside a reconciliation bill that would include the care-economy measures cut, like affordable housing and free community college, along with substantial climate-related measures.

“I’ve said all along: no climate, no deal,” Democratic Sen. Ed Markey wrote on Twitter last week. “The bipartisan framework doesn’t get us there. So I agree with our leadership that this must be resolved in reconciliation. Until then, I’m still no climate, no deal – let’s get this done.”

The White House’s domestic climate adviser, Gina McCarthy, said during a forum held by Punchbowl News on Wednesday that the reconciliation bill should include robust climate investments, saying that they “do have some bottom lines in this.”

A memo written by McCarthy and White House senior adviser Anita Dunn said that Biden remains committed to “using all the tools at his disposal” to fight the climate crisis.

They wrote: “As we work to pass the Bipartisan Infrastructure Framework, we will also continue to advance the full suite of proposals in the American Jobs Plan and American Families Plan through additional congressional action, including budget reconciliation, to ensure we build back our economy and country better.”

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PwC announces a $12 billion plan to recruit 100,000 people and train 25,000 Black and Latinx students over 5 years

bob moritz pwc davos 2020
Bob Moritz, global chair of PwC

  • PwC announced a $12 billion plan to hire an extra 100,000 people between 2021 and 2026.
  • About 10,000 of these hires will be Black and Latinx students, it said Tuesday.
  • The firm said it wanted to focus more on environmental, social, and governance advice to clients.
  • See more stories on Insider’s business page.

PwC is spending $12 billion on a new plan to hire 100,000 people over the next five years.

“The New Equation” plan, announced on Tuesday, is set to pump money into recruitment, training, and technology at the firm, and focus PwC on giving clients more environmental, social, and governance advice, the company said. The professional services firm said it wanted to grow its 284,000-person global workforce by more than a third between 2021 and 2026.

PwC US is committing $125 million to prepare 25,000 Black and Latinx students for business careers as part of the plan, Tim Ryan, PwC’s US chairman and senior partner, said in a LinkedIn blog post on Tuesday.

PwC plans to hire 10,000 of these students over the next five years, he said.

“We’re going to get them ready for the workforce, to create internships, and training opportunities,” Ryan told Fast Company on Tuesday.

“Ten thousand will come to us, which is important, but we will be equally proud of the [other] 15,000 we’re going to help because that then gets to solving the broader societal problem.”

PwC currently has around 55,000 US employees and hires up to 8,000 Americans a year, the Financial Times reported.

The infrastructure plan also includes a $3 billion drive to double its business in the Asia-Pacific region, PwC said. Bob Moritz, global chair of PwC, said the firm was “going to massively invest to redefine itself and rebrand itself to make sure we’re valuable for what our clients need and what the world needs.”

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Top Republican accuses White House of moving goalposts on infrastructure –┬ábut she didn’t budge on either of Biden’s requests

Shelley Moore Capito
Sen. Shelley Moore Capito (R-WV).

  • Biden ended infrastructure negotiations with Sen. Shelley Moore Capito on Tuesday.
  • Capito later said she was “disappointed” at how things ended and Biden kept “moving goalposts” on her.
  • But her GOP group barely budged on their offer and refused to raise taxes, which Biden proposed.
  • See more stories on Insider’s business page.

After nearly six weeks of back and forth between President Joe Biden and West Virginia Sen. Shelley Moore Capito on infrastructure, Biden ended the negotiations on Tuesday after failing to come to an agreement.

Capito said in a Fox News interview on Wednesday that the White House “kept moving the goalposts” on the Republican group, and she was “frustrated” with how things turned out.

“I’m a bit disappointed and frustrated that the White House kept moving the ball on me and then finally just brought me negotiations that were untenable and then ended the negotiations altogether,” Capito said. It’s unclear exactly what Capito was referring to, but the public statements from both sides indicate the White House kept coming down on the cost of the package and the GOP was inflexible.

There seemed to be disappointment on both sides. White House Press Secretary Jen Psaki said in a statement on Tuesday that Biden was disappointed that “while he was willing to reduce his plan by more than $1 trillion, the Republican group had increased their proposed new investments by only $150 billion.”

Capito and the group of Republicans first brought Biden a $568 billion infrastructure offer, which was significantly smaller than the $2.25 trillion infrastructure plan he proposed. He then offered the group $1.7 trillion, and even suggested going as low as $1 trillion, but the GOP only came back to him with a $928 billion offer, which included only $150 billion in new spending.

Since unveiling his plan, Biden has kept saying he’s committed to a bipartisan agreement, as seen with his willingness to come down on cost to get both sides of the aisle on board. For instance, after his talks with Capito collapsed, he reached out to some members of a new bipartisan group about another infrastructure proposal. Sen. Mitt Romney of Utah, a member of that group, has already said that tax increases are out of the question.

Using corporate tax hikes to fund his plan is one of the things Biden has remained firm on, but the GOP group never budged on the possibility of doing so, calling it a “red line” and suggesting repurposing unused stimulus funds instead.

“The pay-fors that they brought to me the final time were many taxes,” Capito said. “We had told them before we could do this without raising taxes and we gave them great opportunity to look at our pay-fors and how we would pay for this. I think when they brought the tax hikes before me the last time when I was in the Oval Office I knew they weren’t really serious at that point.”

Given that tax hikes are a core component of Biden’s plan, the likelihood of reaching a bipartisan agreement is slim, and Senate Majority Leader Chuck Schumer said during a press briefing on Tuesday that Democrats are preparing to use reconciliation, meaning passing a bill without any GOP votes.

“We all know as a caucus we will not be able to do all the things that the country needs in a totally bipartisan way,” Schumer said. “So at the same time, we are pursuing the pursuit of reconciliation.”

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Elizabeth Warren says the GOP infrastructure plan is not a ‘serious’ counteroffer and leaves out women

senator elizabeth warren
Sen. Elizabeth Warren.

  • GOP Senators introduced a $928 billion counteroffer to Biden’s $2.25 trillion infrastructure plan.
  • Massachusetts Sen. Elizabeth Warren said their plan is not a “serious” offer and leaves out women.
  • She, along with other Democrats, also criticized the GOP idea to repurpose stimulus aid to fund infrastructure.
  • See more stories on Insider’s business page.

A group of Republican senators unveiled their $928 billion counterproposal to President Joe Biden’s infrastructure plan, increasing the price tag from their first $568 billion counteroffer.

Massachusetts Sen. Elizabeth Warren was not impressed with this new plan.

“I don’t really think this is a serious counteroffer,” Warren told MSNBC following the release of the plan.

The past few weeks in the White House have been filled with Oval Office meetings attempting to get Republicans on board with Biden’s $4 trillion infrastructure plan. After a GOP group – led by Sen. Shelley Moore Capito of West Virginia – met with Biden to discuss their original $568 billion proposal, the White House countered that with a $1.7 trillion proposal, down from its initial price tag of $2.25 trillion on the American Jobs Plan.

And on Thursday, the Republicans brought a $928 billion offer to the table, largely focused on funding for physical infrastructure, and only a $257 billion increase in new government spending beyond what Congress has already authorized.

Warren criticized the plan for lacking a clear funding method and only suggesting repurposing already allocated stimulus funds.

“First of all, they don’t have pay-fors for this, it’s not real,” Warren said. “They have this illusory notion of how we’re going to take money that’s already been committed to other places and other spending.”

She added that women are also left behind in this package because while Biden’s American Families Plan proposed significant investments in childcare, the GOP offer does not allocate any funding toward care-economy measures.

“Millions of women are out of the workforce right now and one out of four says the reason [for that]: I can’t get childcare,” Warren said. “This is our chance to expand our idea of what infrastructure means. Give women who want to work a real chance in the workplace,” she added.

Other Democratic lawmakers joined Warren in criticizing not only the GOP plan, but the idea of using stimulus aid to pay for it instead of the corporate tax hikes Biden had originally proposed.

“They’re talking about using the child tax credit to pay for this,” Colorado Sen. Michael Bennet told reporters. “This is a significant tax cut for working people. Ninety percent of America’s kids – more than that – are going to benefit. It’s going to cut childhood poverty almost in half so I really don’t understand their desire to raise taxes on working people.”

And Insider reported that 14 state treasurers are urging Congress to refrain from repurposing stimulus money to fund infrastructure, given that the aid is much needed to sustain economic recovery for state and local governments.

“This is called a jobs bill. It’s infrastructure and jobs,” Warren said. “So long as we’re investing in roads and bridges and lots of concrete, about 90% of those jobs are going to be for men. But when we’re talking about childcare, those jobs are nearly all going to women and those jobs today pay far too little. We have a chance to turn those into good paying, professional jobs.”

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Biden’s budget will reportedly cost $6 trillion while running a $1.3 trillion deficit over a decade

Joe Biden
President Joe Biden.

  • Biden’s budget will propose $6 trillion for fiscal year 2022, according to a New York Times report.
  • It will also run a $1.3 trillion deficit over a decade, which will be offset by corporate tax hikes.
  • This will mainly fund Biden’s infrastructure plan while leaving out campaign promises, like canceling student debt.
  • See more stories on Insider’s business page.

President Joe Biden’s first budget request will officially be unveiled on Friday, and the New York Times found that it will propose $6 trillion to help fund his major infrastructure spending plans.

On Thursday, the Times reported that the $6 trillion budget proposal for fiscal year 2022 will be accompanied by deficits of $1.3 trillion over the next decade, and it will also call for total spending to increase to $8.2 billion by 2031, according to obtained documents.

This would take the US to its highest federal spending levels since World War II, and it comes as Biden is lobbying for his $4 trillion infrastructure plan, which not only includes rebuilding physical infrastructure, but climate change initiatives and efforts to boost the middle class, as well. This budget proposal will help him do that.

The Times added that under Biden’s budget proposal, the federal deficit would hit $1.8 trillion in 2022, and it would recede slightly after that before growing to nearly $1.6 trillion by 2031. But his plans to fund infrastructure by corporate tax hikes and wealthy people would help shrink those deficits, despite Republicans firmly opposing those hikes.

Last week, Insider reported that issues that Biden campaigned on – like student debt forgiveness – will not be included in Friday’s budget proposal, based on information sources told The Washington Post, and health care promises, like lowering prescription drug costs, won’t be making the cut, either.

“The President’s budget will focus on advancing the historic legislative agenda he’s already put forward for this year,” Rob Friedlander, spokesman for the White House budget office, told the Post. “The budget won’t propose other new initiatives but will put together the full picture of how these proposals would advance economic growth and shared prosperity while also putting our country on a sound fiscal course.”

Biden also pledged to reform the unemployment insurance system when unveiling his American Families Plan, but that will reportedly not be in the budget, either. It will mainly focus on already proposed infrastructure investments, like education and climate change, and will likely not go too far beyond that for the time being.

However, this budget proposal requires congressional approval, so its fate rests at the hands of lawmakers. But given the course the infrastructure bill has taken so far, there will likely be disagreements on what will end up in the budget. For example, Democrats have been urging Biden to ditch negotiations with the GOP on infrastructure and pass a big spending bill while Republicans continue to counter Biden’s plan with a lower scope and size.

But Biden is still committed to bipartisanship, and whether his budget proposal gets bipartisan support remains to be seen.

White House Press Secretary Jen Psaki said last week that the negotiations were an art of a “different kind of a deal – a deal for the working people.”

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Ford climbs 9% after saying it will boost electric-vehicle spending to $30 billion by 2025

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  • Ford climbed as much as 9% Wednesday after revealing plans to boost its electric-vehicle investment to $30 billion by 2025.
  • The automaker also said it expects electric vehicles to make up 40% of its global sales by 2030.
  • The announcements were made during Ford’s Investor Day, its first under CEO Jim Farley.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Shares of Ford Motor climbed as much as 9% on Wednesday after the automaker revealed plans to boost its electric-vehicle investment to more than $30 billion by 2025, up from its previous $22 billion target.

The company also said it expects electric vehicles to make up 40% of its global sales by 2030.

The series of announcements were made during Ford’s Investor Day conference on Wednesday, the first under CEO Jim Farley who assumed his post in October 2020. Farley came to Ford in 2007 after a career at Toyota.

“While the stocks and the EV space are clearly going through a painful digestion period, we view this as a short-term pullback in a bullish multi-year upward rally,” Wedbush analyst Dan Ives said in a note Wednesday.

He added: “We forecast the EV market represents a $5 trillion [total addressable market] over the next decade with many EV original equipment manufacturers/supply chain players poised to be major winners over the coming years in this green tidal wave.”

The rationale behind the new plan dubbed “Ford+” is for investors to shift their perspective of the company from an automaker to a technology firm instead.

The company under the plan aims to deliver an 8% operating-income margin by 2023.

Ford joins other automakers worldwide in transitioning gasoline-powered vehicles into electric-powered ones in a bid to promote a greener environment and to compete with the leading electric-vehicle makers such as Tesla and Volkswagen.

General Motors in January 2021 said it will end all sales of gas-powered vehicles by 2035.

Thus far, Ford has amassed 70,000 reservations for its F-150 Lightning, an all-electric version of its iconic pickup truck that was unveiled one week ago.

“As more companies make the commitment to go carbon neutral, they are going to expect electric products that can integrate into their operations easily,” Jim Farley, Ford president and CEO, said in a statement in May. “Ford is so uniquely positioned to answer this call because we have a zero-emissions pickup and van, many of our customers want both vehicles in their fleet.”

US President Joe Biden last week tested Ford’s electric F-150 prototype himself during a visit to the Ford plant to tout federal investment in EVs.

The president has committed $174 billion to boost EV production under his massive $2 trillion infrastructure plan.

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The White House offers to cut infrastructure plan down to $1.7 trillion

amtrak joe biden
President Joe Biden.

  • The White House presented a $1.7 trillion infrastructure counteroffer to Republicans.
  • It slashes the $2.25 trillion price tag substantially and reduces funding for roads and bridges.
  • The counteroffer came after a GOP group did not meet a Tuesday deadline to bring a new offer.
  • See more stories on Insider’s business page.

President Joe Biden has offered to cut down the cost of his infrastructure plan – the American Jobs Plan – from $2.25 trillion to $1.7 trillion, presenting a counteroffer to Republicans on Friday.

The offer did not address the $1.7 trillion American Families Plan, which is largely focused on care-economy measures, so the initial $4.1 trillion combination of packages would now come to about $3.2 trillion.

White House press secretary Jen Psaki said that officials including Transportation Secretary Pete Buttigieg and Commerce Secretary Gina Raimondo offered up the reduced package.

“In our view, this is the art of seeking common ground,” Psaki said.

Psaki said that proposed funding for broadband was reduced to match that of Republicans, and proposed funding for roads, bridges, and major projects was also reduced to be more in line with senators’ proposals. Investments in research and development, supply chains, manufacturing, and small businesses will be shifted into different legislative pushes.

But the White House said it would continue to push for funding for critical transportation infrastructure, especially railways.

Psaki also said the White House planned to reiterate the president’s unwillingness to raise taxes on Americans making under $400,000, such as through a gas tax and user fees.

“He believes that the extraordinarily wealthy, that companies – many of whom have not paid taxes in recent years – can afford a modest increase to pay for middle-class jobs,” Psaki said.

Republicans had previously offered a $568 billion counteroffer to the White House, well below the $2.25 trillion originally proposed and still substantially lower than the new counteroffer. It would preserve Trump-era tax cuts, which are directly countered in Biden’s proposed funding.

After the GOP group met with Biden last week to discuss its $568 billion counterproposal, Biden gave them a Tuesday deadline to bring him a new plan to negotiate, but that never happened.

Instead, the group met with Buttigieg and Raimondo, and a new plan wasn’t introduced, with the senator from West Virginia who led the Republican plan, Shelley Moore Capito, telling reporters after the meeting that there was “progress, but we still got a ways to go.”

“I think they’re digesting what we proposed, and I think the plan is for them to react to that,” Capito added.

Capito’s office said in a statement to Insider that Friday’s White House offer was “well above the range of what can pass Congress with bipartisan support” and that Republicans and the White House still differed on what’s considered infrastructure, how much should be spent on it, and where that money should come from.

“Based on today’s meeting, the groups seem further apart after two meetings with White House staff than they were after one meeting with President Biden,” Capito’s office said. “Senate Republicans will further review the details in today’s counteroffer and continue to engage in conversations with the administration.”

Separately this week, Capito also floated using unused unemployment benefits to fund infrastructure after April’s weak jobs report, which caused a growing number of GOP-led states to end Biden’s weekly $300 unemployment benefits early.

The White House’s counteroffer comes as Democrats are increasingly calling on Biden to ditch negotiations with Republicans and act big on infrastructure legislation.

Psaki said the negotiations were an art of a “different kind of a deal – a deal for the working people.”

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