The Wall Street Journal: Democrats Hear Conflicting Messages From Voters on $3.5 Trillion Plan


On a telephone town hall hosted by the seniors’ group AARP on Thursday night, Rep. Abigail Spanberger was peppered with questions about how to lower the cost of prescription drugs and support caregivers, two important planks of the $3.5 trillion spending package Democrats on Capitol Hill are currently crafting.

But just two days earlier, as the Virginia Democrat toured farms in the district, some of her other constituents aired worries about whether that amount of spending could fuel inflation, while also expressing concern about some of the tax changes under discussion as part of the package.

The competing interests within this one district in central Virginia highlight the challenges Democrats face as they try to squeeze through climate provisions and a vast expansion of the country’s safety net through a legislative gantlet that requires the support of nearly every Democrat in Congress. Many Democrats are eager to fund new social programs but are also attuned to concerns from constituents and colleagues worried about possible side effects from pumping trillions of dollars into the economy.

Unlike some lawmakers, Ms. Spanberger hasn’t set a specific cap on how much spending the package should include, but said she would be assessing how it comes together.

“There are a lot of ways to spend an immense amount of money in a really good way and other ways we don’t need to spend money,” Ms. Spanberger said in an interview. “We need to be responsible in how we choose to make these investments.”

Many centrist Democrats, including Ms. Spanberger, would like to see the sweeping budget package paid for with government savings and new tax revenues from closing what they see as tax loopholes exploited by businesses, instead of new debt. But those sources of revenue can be deeply controversial, particularly changes proposed by President Biden to how capital gains are taxed.

Under current law, people who die with unrealized gains don’t pay capital-gains taxes, because of a tax-law rule known as stepped-up basis. Their heirs pay capital-gains taxes, but only on gains after the prior owner’s death and only when they sell. Mr. Biden’s plan would treat death like a sale for tax purposes and raise the top capital-gains rate to 43.4% from 23.8%.

On Monday, the House Ways and Means Committee released its proposal increasing the capital-gains tax rate, but didn’t suggest any changes to the stepped-up basis rule.

The Biden proposal offers a $1 million per-person exemption to all and would let farm and business owners defer taxes as long as those entities remain owned and operated by the family. A Senate Finance Committee options list suggests a $5 million per-person exemption plus a $25 million farm exemption, an indication that lawmakers are trying to salvage the Biden proposal by excluding even more farmers.

But many in the agriculture community—and lawmakers who represent them—remained concerned about the proposed changes, and lawmakers have been looking for other ways to raise the money they had hoped would come from the revisions. The Ways and Means Committee proposal raises several other taxes on closely held businesses to help cover the cost of the plan.

“Doing away with stepped-up basis, that is of big concern to anyone in a family-owned small business,” said Jim Miller, an independent and co-owner with his wife of Greenstone Farm, a horse-breeding farm toured by Ms. Spanberger last week. “Things like that wind up being a very big concern for succession planning.”

Republicans have sharply criticized this proposal, warning Democrats it could become a political liability.

“Of all the things they’re trying to do, that’s the hardest one to sell,” Senate Minority Leader Mitch McConnell (R., Ky.) said earlier this month, referring to the proposed change to the stepped-up basis. Ms. Spanberger is part of a group of farm-state Democrats who have sent letters to Democratic leaders expressing concerns about the proposal.

Other constituents of Ms. Spanberger said they were worried that Congress’s spending $3.5 trillion, on top of a roughly $1 trillion infrastructure bill passed by the Senate, but not yet approved in the House, would fuel inflation.

Hugh Jones, the owner of Richlands Dairy and Creamery, said he already spends twice as much on diesel fuel now as he did a year ago and that he is “big time” concerned about rising costs.

“When the government spends money, they’re not fiscally responsible with it,” he said, accompanying Ms. Spanberger on the farm tour. “It’s all extremely worrisome,” said Mr. Jones, who said his mind-set aligns more often with Republicans but he hasn’t liked GOP candidates recently.

But reining back the amount of spending in the package could also restrict what kinds of programs it would fund, as well as their duration. Many of those programs, including subsidized child care, universal prekindergarten and expanded Affordable Care Act subsidies, remain popular with constituents.

On Thursday’s AARP call, Ms. Spanberger heard from Steve, an Orange County resident who inquired about funding for in-home care. He takes care of his mother, who suffers from Alzheimer’s.

The House Energy and Commerce Committee on Thursday unveiled its part of the broader package, which included $190 billion in funding to help seniors and people with disabilities receive in-home care. But Sen. Joe Manchin (D., W.Va.), a centrist who has balked at spending $3.5 trillion, raised questions Sunday on CNN about whether home-care services should receive more funding.

And several residents pressed Ms. Spanberger on details of a provision aimed at lowering the cost of prescription drugs by allowing Medicare to negotiate their price, a key source of savings included in the budget package. But the details of such negotiations are controversial among Democrats, with some centrists offering a rival proposal.

“It’s popular because it makes sense and will drive down prices,” Ms. Spanberger said. “In my district, that’s a major priority.”

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