January 15, 2021
What to expect in Washington (January 15)
Thursday night, President-elect Joe Biden announced a $1.9 trillion "American Rescue Plan," the first step in a two-step plan of rescue and recovery "to build a bridge to the other side of the crisis we face to a better, stronger, more secure America." The plan includes more than $400 billion to combat the pandemic through a national vaccination program, increased testing and tracing, and additional funding for schools to help them reopen safely, along with $350 billion in funding to state and local governments experiencing budget shortfalls. It also includes $1,400 in direct payments, enhanced unemployment benefits, federally mandated paid leave, and various other supports for individuals, small businesses, and communities. Tax provisions are limited to childcare credit, EITC, and Child Tax Credit expansions long sought by Democrats.
Today's Wall Street Journal (WSJ) said, "The president-elect won't offer spending-cut or tax-increase offsets for his plan and will instead rely on federal borrowing, according to a Biden official." Biden lays out vaccine plans today (Friday) and said last night, "the vaccine rollout in the United States has been a dismal failure thus far."
Reaction to the plan was enthusiastic from Democrats, who agree that swift action is needed. In a joint statement, House Speaker Nancy Pelosi (D-CA) and incoming Senate Majority Leader Chuck Schumer (D-NY) said in part, "We will get right to work to turn President-elect Biden's vision into legislation that will pass both chambers and be signed into law." The Speaker holds a news conference this morning and may say more. Incoming Senate Budget Committee Chairman Bernie Sanders (I-VT), who will be somewhat of a gatekeeper to Biden's plans in developing budget resolutions and reconciliation instructions, said he looks forward to providing "bold emergency relief to the American people as soon as possible."
Republicans were critical. House Ways & Means Committee Ranking Member Kevin Brady (R-TX) said the plan is "another economic blind buffalo that does nothing to save Main Street businesses, get people back to work, or strengthen our economy." Senator Marco Rubio (R-FL) tweeted: "President-Elect Biden served in the Senate for over 35 years. So he knows the plan he outlined tonight can't pass 'quickly' & will delay the 2k for hard hit Americans. Let's get the extra money to people first."
Biden is expected to first try to move the package in a bipartisan manner — which will require 60 Senate votes — but if Republican support doesn't materialize quickly, Democrats could turn to budget reconciliation. That process allows simple majority passage, meaning the support of all 50 Senate Democrats plus the tiebreaking vote of VP-elect Kamala Harris, but can take longer because Congress must agree to a budget resolution with reconciliation instructions. There are two opportunities to employ this process in calendar year 2021, because an FY2021 budget wasn't processed and an FY2022 budget resolution will be available.
A January 13 WSJ story said if Democrats move a first bill through reconciliation, they have an incentive to pack party priorities into the package because of the limits on how many such bills can pass. The story quoted EY's Cathy Koch on the challenge of holding together all 50 Senate Democrats. "It's not easy to put a package together when you need everyone's vote in a caucus," she said. "That is a difficult but achievable goal if the caucus is united in a purpose. But if they're not, it is much more difficult."
The New York Times said January 14 of plans for future action, "Biden plans to unveil another, larger set of spending proposals in February, and he began laying the groundwork to finance those efforts by raising taxes on corporations and the rich" in highlighting during the speech how the wealthy have gotten wealthier during the pandemic. "The second package is expected to be centered on job creation and infrastructure, including hundreds of billions of dollars of spending on clean-energy projects like electric vehicle charging stations, along with health care and education spending," the report said.
On January 14, President-elect Biden named Nadiya Beckwith-Stanley, a Policy Advisor on the Biden-Harris Transition who previously was an Associate in the Tax group of Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates in Washington, DC, as Special Assistant to the President for Budget and Tax Policy.
The House Republican Steering Committee selected Reps. Carol Miller (R-WV), Kevin Hern (R-OK) and Lloyd Smucker (R-PA) to serve on the Ways and Means Committee, to fill two seats due to retirements and another attributable to the tightened party ratio in the House. The selections still need to be approved by the Republican Conference.
The OECD continues its public consultation meeting on the BEPS 2.0 Reports for a second day, with a focus on Pillar Two. During the Pillar One session yesterday, Pascal Saint-Amans, director of the OECD's Centre for Tax Policy and Administration, said "we are, in a sense, in waiting mode to get signals from the US" given the presidential transition, and that hopefully the new Treasury Department will participate in the G20 finance ministers' meeting at the end of February or at a later meeting.
The BEPS 2.0 project aims to stave off unilateral digital services taxes (DSTs), viewed as unfairly targeting US tech companies and opposed by US lawmakers from both parties. On January 14, the United States Trade Representative issued findings in Section 301 investigations of DSTs adopted by Austria, Spain, and the United Kingdom, concluding that each of the DSTs discriminates against US companies, is inconsistent with prevailing principles of international taxation, and burden or restricts US commerce.