House Democrats should be careful they don’t get BTU’d

Don’t vote for a tax increase the Senate won’t accept

Speaker Nancy Pelosi could be saying goodbye to her House majority if she once again forces her caucus to vote for a tax increase the Senate won’t support, Thompson writes.  (Tom Williams/CQ Roll Call file photo)
Speaker Nancy Pelosi could be saying goodbye to her House majority if she once again forces her caucus to vote for a tax increase the Senate won’t support, Thompson writes. (Tom Williams/CQ Roll Call file photo)
Posted September 20, 2021 at 10:00am

The House is moving ahead to vote on a massive tax increase, which would raise rates on individuals, investment and U.S. companies.

For many businesses, the new corporate rate would be the highest in the industrialized world, at 26.5 percent. This would result in a combined federal and state average tax rate of 30.9 percent, more than 7 points higher than that of industrialized countries in the Organization for Economic Cooperation and Development. 

In almost two dozen states, including New Jersey, Pennsylvania and New Hampshire, the combined corporate rate would be higher than any other developed country in the world.

The new combined rate would exceed 30 percent in most states, including Arizona and West Virginia. It would be higher than every one of our major trading partners, including Canada, the United Kingdom, Germany and France. Even China would have a lower tax rate. 

While the proposed House tax rate would put U.S. companies at a real competitive disadvantage, it’s also not a tax rate the Senate would support. 

So Speaker Nancy Pelosi will be asking (or forcing) her members to vote for a tax increase that is unlikely to be signed into law. In the recent past, this has happened twice before to House Democrats, and both times they lost their majority in the next election. 

For House Democrats, it is called getting BTU’d. 

In 1993, Democrats in the chamber were forced to vote for a large, broad-based energy tax, called a BTU tax, based on British thermal units. The Senate refused to accept the BTU tax, and it was dropped. But House Democrats who voted for it faced the consequences in 1994, when Republicans ran against those who voted for the “Big Tax on U.” Democrats lost 54 seats and control of the House. 

In 2009, Pelosi forced her caucus to vote for another big tax increase, a cap-and-trade bill. That measure would have placed mandatory limits on greenhouse gas emissions and was essentially a large tax increase on energy. Once again, the Senate refused to support this tax hike, and it was dropped. But House Democrats who voted for it were BTU’d, and Democrats lost 63 seats and control of the House that fall. 

A corporate tax rate hike is similar to a broad-based energy tax. It would hit workers, consumers and savers, resulting in lower wages, higher prices and lower retirement savings. With inflation soaring and the economic recovery slowing, the American people oppose raising taxes in the middle of the pandemic by an overwhelming 80 percent to 20 percent

The lesson for House Democrats should be clear — do not vote for a tax increase that the Senate will not support. 

Bruce Thompson is an economic policy adviser for the RATE Coalition, which advocates a globally competitive corporate tax rate for the U.S. He previously worked on Capitol Hill and was assistant Treasury secretary for legislative affairs under President Ronald Reagan and director of government relations for Merrill Lynch for 22 years.