Democrats debate tax increases to cover multitrillion-dollar agenda

Neal and Schatz split over how strictly bills must pay for themselves

Congressional Democrats enter the new Congress with dozens of new members, comfortable majorities in both the House and Senate, and a broad consensus to reverse President Trump’s tariffs and Republican cuts to spending on Medicaid, food stamps and health-insurance subsidies. The thornier debate is whether and how to cover the potentially trillion-dollar-plus price tag.

Many Democrats favor tying tax increases to higher spending because they want to avoid deepening historically large U.S. budget deficits. They also see a political advantage in pairing policies that lower consumers’ costs with higher levies on wealthy people and corporations. Even bills with tax increases that would almost certainly be blocked by Senate Republicans or the president could function as a dress rehearsal for 2029, when Democrats hope to control Congress and the White House.

But Democrats’ best chances of maneuvering bills past the Senate’s 60-vote filibuster barrier and Trump’s veto threats into laws that benefit people in the near term probably lie in avoiding the corporate and individual tax hikes that Republicans will resist. Some Democratic lawmakers are also wary of boxing themselves in with promises to pay for everything.

“We should pay for some of it, for sure,” said Rep. Richard Neal (D., Mass.), who is reclaiming the gavel of the tax-writing Ways and Means Committee.

Sen. Brian Schatz of Hawaii, who is poised to be the second-ranking Democrat in the Senate, said he is open to paying for the party’s agenda but sounded wary of a hard-and-fast rule, especially after watching Republicans’ major legislation last year add to deficits.

“I don’t think we should play this game where the things we want have to be paid for and the things they want can be put on a credit card,” Schatz said, referring to Republicans. “So I’m cautious about falling into that trap, but if we can find pay-fors, that’s even better.”

Neal said Democrats are still figuring out their internal consensus, and that they are eager to show they can quickly deliver results that put money into people’s pockets and demonstrate the differences between themselves and Trump.

Democrats have several procedural routes. They can use the one-party budget reconciliation process to get bills to Trump’s desk with simple majorities. They can clear the Senate filibuster with backing from a handful of Republicans, though Trump could veto such a measure. Or they can try to muster bipartisan supermajorities, particularly on tariff policy, to override Trump’s opposition. Democrats may take different procedural paths and tax strategies with different bills.

Democrats expect to start the new Congress with a series of bills reversing policy changes that Republicans enacted in the “one big, beautiful bill” last year. That law imposed work requirements on Medicaid recipients and tightened food-stamp eligibility. Republicans also allowed the expiration of expanded subsidies for health insurance under the Affordable Care Act at the end of 2025. Trump has imposed a series of tariffs that raised consumers’ costs, so undoing them could address the affordability concerns that helped propel Democrats to victory.

Reversing all of those would carry a multitrillion-dollar price tag over a decade. Paying for all of them could quickly consume most of the politically unifying tax-rate increases on corporations and wealthy individuals — before Democrats attempt any new initiatives on paid leave, child care, the child tax credit, Medicare expansion or preventing Social Security’s insolvency.

Putting the new agenda on the federal credit card could be tough for many Democrats to swallow as the publicly held national debt crosses 100% of gross domestic product on its way to surpassing the post-World War II record. Climbing interest rates and the rising costs of Social Security and Medicare provide constraints that previous Democratic majorities didn’t face.

“Passing revenue now, I think, shows that they’re being responsible in terms of their investments, that they think these investments are worth paying for, that they are worth the money,” said Brendan Duke, senior director of federal budget policy at the progressive Center on Budget and Policy Priorities.

Democrats have a deep menu of revenue-raising options, starting from the cutting-room floor of their previous majority, when House Democrats’ favored tax increases were jettisoned amid opposition from some Democratic senators. In 2021, the House plan included bumping the corporate tax rate to 26.5% from 21%, raising the top individual tax rate to 39.6% from 37% and adding a surtax on incomes above $5 million.

They can also try reversing some tax cuts from last year’s GOP law, such as the higher estate-tax exclusion and expanded incentives for business investment.

“There is a lot of potential revenue because they cut taxes just so deeply at the top,” said Rep. Brendan Boyle (D., Pa.), who is in line to be chairman of the Budget Committee. “As unpopular as it may be, we do actually have to begin to start taking deficits and debt seriously.”

Some Democrats are also interested in taxing artificial intelligence and data centers and in more targeted taxes on billionaires’ wealth or unrealized capital gains.

Democrats may not fully offset all of their bills as they try to rack up some accomplishments. At times, they hope to find a willing partner in Trump, who has occasionally flirted with supporting higher taxes but has pushed taxes down. Treasury Secretary Scott Bessent said this past week that he thought he could work with Democrats to curtail unspecified “tax gimmicks” without raising rates.

Neal said he thought the health-insurance subsidies that lapsed at the end of 2025 were an opportunity for a deal. “That’s four million people that would have some cost relief if we could restore those tax credits, which I actually think Trump might be interested in doing,” Neal said, describing the president as “pretty transactional.”

Many Democrats chafe at what they see as a pattern where Republicans pass deficit-financed tax cuts that limit fiscal space when Democrats take power. “You guys party all night and we have to come clean up the empties the next morning,” said Bharat Ramamurti, who was an economic-policy aide to President Joe Biden.

Beyond that, a strict focus on making individual bills budget-neutral can miss the bigger picture, said Rep. Becca Balint (D., Vt.). “Should we pay for it? Yes. Do we have money to pay for it? Yes, and what we do instead is spend it on things that the American people don’t want,” she said, citing the costs of the Iran war.