WASHINGTON, Sept 15 (Reuters) - Legislation to raise taxes on the wealthy and corporations advanced out of a U.S. House of Representatives committee on Wednesday to help fund President Joe Biden's $3.5 trillion social spending plan, but a provision to slash drug prices stalled elsewhere on Capitol Hill.
Many elements of Democrats' sweeping "reconciliation" bill remain in flux due to the competing demands of the party's centrists and progressives. Biden met with two influential moderate Senate Democrats on the legislation at the White House.
The Democratic-led House Ways and Means Committee voted 24-19 to approve the tax-related portions of the bill, which include raising the top income tax rate to 39.6% from 37% and the top corporate tax rate to 26.5% from 21%.
The plan boosts the capital gains tax rate to 25% from 20% for Americans with taxable income above $400,000 and adds a 3% surtax on income above $5 million.
The committee's work will be treated as recommendations to House and Senate leaders as they craft final versions of the massive tax and spending bill in coming weeks.
Representative Stephanie Murphy was the lone Democrat to vote against the tax plan, as did all Republicans on the panel. Murphy said she supported some elements such as tax breaks for green energy.
"But there are also spending and tax provisions that give me pause, and so I cannot vote for the bill at this early stage," she said in a statement, adding the final version can be "fiscally responsible."
Democrats, who aim to pass the bill without the support of Republicans using budget reconciliation rules, cannot afford to lose more than three votes in the House and any votes in the Senate.
Rifts between Democratic moderates and progressives also were on display at the House Energy and Commerce Committee, where a 29-29 vote blocked a provision that would allow the Medicare healthcare program for seniors to negotiate lower drug prices with pharmaceutical companies.
Three Democrats sided with Republicans in opposing the measure, long sought by progressives to beat back healthcare costs, but opposed by drugmakers as stifling innovation.
A spokesman for House Speaker Nancy Pelosi said the provision "will remain a cornerstone of the Build Back Better Act as work continues" on a final version.
The drug pricing plan could be reinstated due to the House Ways and Means Committee approving identical language in its legislation. The House Rules Committee could also add it to a final version ahead of a floor vote.
Manchin, Sinema Leverage
Biden met separately with moderate Democratic Senators Joe Manchin and Kyrsten Sinema on Wednesday to discuss Democratic-backed domestic spending legislation, the White House said.
Democrats hold a razor-thin majority in the Senate, making Manchin and Sinema essential to the $3.5 trillion bill's prospects.
White House press secretary Jen Psaki told reporters the purpose of the meetings was to discuss a “path forward” on Biden’s legislation.
Sinema spokesman John LaBombard said: "Today’s meeting was productive, and Kyrsten is continuing to work in good faith with her colleagues and President Biden as this legislation develops."
LaBombard did not provide details of the conversation.
Manchin was scheduled to discuss the wide-ranging spending and tax bill on Wednesday evening, Psaki indicated.
The legislation - opposed by Republicans - aims to supplement a separate bipartisan $1 trillion infrastructure bill and would focus on matters including education, childcare and climate-related projects.
Manchin said over the weekend he would not back a $3.5 trillion package and urged a slimmer version, putting him at odds with other Democrats backing the larger bill to tackle the party's major policy goals while they maintain a narrow hold on Congress.
(Reporting by David Lawder, Ahmed Abouleinen and Richard Cowan; Additional reporting by Susan Heavey, Trevor Hunnicutt and Susan Cornwell; Editing by Jonathan Oatis and Peter Cooney)