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May 12, 2021, 4:40 p.m. EDT

McConnell says tax increases a ‘red line’ in infrastructure talks with Biden

Robert Schroeder

The Senate’s top Republican on Wednesday said there was a desire in both parties to make a deal on infrastructure, but stressed after a meeting with President Joe Biden that the GOP will reject tax increases to pay for it.

“We’re not interested in re-opening the 2017 tax bill,” said Senate Minority Leader Mitch McConnell, a Kentucky Republican, in comments outside the White House. “That is a red line,” he said, standing alongside House Minority Leader Kevin McCarthy of California, who was also in the Oval Office meeting with Biden and top Democrats.

The meeting came as Biden has proposed a $2.3 trillion infrastructure (BATS:PAVE) plan and a $1.8 trillion package aimed at child care, education and other priorities. Republicans have said they are open to negotiating on infrastructure. But the GOP leaders and Biden appeared to remain divided over the definition of the term.

Now read: Biden rolls out $2.3 trillion infrastructure plan: ‘It’s bold, yes, and we can get it done’

Also see: Here’s what’s in Biden’s $1.8 trillion ‘American Families Plan’

“That’s not home health,” McCarthy said. “That’s roads, bridges, highways, airports, broadband. Those are the places we can find common ground and work together.”

McConnell and McCarthy joined their Democratic counterparts, Senate Majority Leader Chuck Schumer of New York and House Speaker Nancy Pelosi of California, in the meeting with Biden. It was the first time that the president had huddled with the leaders as a group since he took office.

Biden said in remarks at the White House that he was “encouraged” by his talks with the leaders, and said he believes there’s “room to have a compromise on a bipartisan bill.”

He suggested, however, that he would not back down on tax increases to pay for infrastructure. Citing transportation user fees as an example, he said such a pay-for would fall on working-class people. “This has to be a burden shared across the spectrum,” Biden said. Biden’s infrastructure plan calls for raising the corporate tax rate to 28% from 21% — though the president has recently suggested he could accept a 25% rate.

Last weekend McConnell said he would be open to an infrastructure bill of as much as $800 billion . Republican Sen. Shelley Moore Capito of West Virginia, meanwhile, has proposed a $568 billion package . Capito and a small group of her fellow Republicans will hold a separate meeting on infrastructure with Biden on Thursday.

Brian Gardner, chief Washington policy strategist at Stifel, said in a note that he believes Republicans are interested in passing a physical infrastructure bill. But, he said, “the gap between the White House and congressional Republicans might be too great to bridge so a party-line vote using reconciliation procedures remains the most likely path forward.”

The so-called reconciliation process allows for passing legislation with a simple majority vote in the Senate. Even if Democrats use the procedure, however, Gardner expects changes due to the party’s razor-thin majorities in both chambers of Congress. He cites what he calls “growing support within Democratic circles for passing the infrastructure plans without raising taxes.”

Biden’s meeting with the congressional leaders happened a week after McConnell said that “100% of my focus is standing up to this administration.” The Kentucky Republican was responding to questions about infighting in the House GOP. Biden has dismissed McConnell’s remarks, saying he was able to “get a lot done” with the Kentuckian during the Obama administration.

The Oval Office meeting occurred the same day as a vote to remove Rep. Liz Cheney , a Wyoming Republican, from her leadership role. Cheney has angered McCarthy, among other GOP lawmakers, with her criticism of former President Donald Trump’s false claims of election fraud and his role in the U.S. Capitol riot on Jan. 6.

U.S. stocks (DOW:DJIA) (S&P:SPX) fell sharply Wednesday , after a reading on inflation for the year to April climbed 4.2%, the highest rate in about 13 years, reigniting fears that the Federal Reserve may need to dial back its easy money policies earlier than expected.

Link to MarketWatch's Slice.