February 21, 2021
Americas Tax Policy: This Week in Tax Policy News for February 19
This week (February 22-26)
Congress: The Senate will be back in session. The House will continue taking steps to prep the COVID relief bill for a vote late in the week or over the weekend. The House Budget markup is February 22 (1:00 p.m.).
Senate Budget wage hearing: On Thursday, February 25 (10:15 a.m.), the Senate Budget Committee holds a hearing, "Should Taxpayers Subsidize Poverty Wages at Large Profitable Corporations?"
Hearings calendar available here.
Infrastructure: On Wednesday, February 24 (10:00 a.m.), the Senate Committee on Environment and Public Works holds a hearing, "Building Back Better: Investing in Transportation while Addressing Climate Change, Improving Equity, and Fostering Economic Growth and Innovation."
Last week (February 15-19)
Outlook for tax increases: The $1.9 trillion COVID relief reconciliation bill is being prepped for a House vote the week of February 22 with Senate consideration to follow as Democrats aim for enactment by the March 14 expiration of pandemic unemployment insurance programs. "We will meet this deadline," Majority Leader Chuck Schumer (D-NY) said in a February 19 letter to members. There is a tie-in to the broader agenda and prospects for tax increases because the White House is continuing to say the "Build Back Better" infrastructure-plus plan won't be detailed — the expectation is this would occur in President Biden's first address to Congress — until the "American Rescue Plan" COVID bill is enacted. Press Secretary Jen Psaki said February 17 the President is doing what he can to move the COVID bill "through Congress, to communicate with the American public … I would not expect him to lay out next pieces of his agenda until that package is through and signed and that relief is going out to the public." The contents of the next major bill from the Administration and the extent to which it would be paid for with tax increases isn't clear.
Treasury Secretary Janet Yellen, who in January suggested the infrastructure-plus Build Back Better plan may include a corporate tax rate increase to 28%, was asked about tax increases during a February 18 CNBC interview and said: "It would be a package that would probably be proposed later this year. And would involve spending and investments over a number of years in, you know, in infrastructure and education and training, things that would last for quite a few years. And probably tax increases to pay for at least part of it that would probably phase in slowly over time."
The Washington Post February 17 reported that "advocates for issues from climate change to immigration push to get included" in the package; a "cacophony of competing demands is already threatening to divide Democrats;" and Democratic officials have discussed proposing as much as $3 trillion. "Democrats are unified in principle on the need to address the nation's crumbling infrastructure and combat climate change, as well as other key goals of Biden's agenda. But they will face steep divisions on how to enact those policies, torn between climate hawks and moderates over how aggressively to reduce production of natural gas and whether to enact a tax on gas or carbon … " the Post reported. "Unlike with the pandemic relief efforts, Democrats are expected to try to pay for parts of the infrastructure package — possibly as much as half of it — through new tax increases on wealthy individuals and corporations. Those tax hikes could prove controversial, particularly if the U.S. economy remains in a rut, fueling intense opposition from Republican lawmakers and the business lobby, and potentially some moderate Democrats as well." (Other reports have said the bill could be largely deficit-financed, and that a March rollout is likely.)
Groundwork for tax increases: Budget Committee Chairman Bernie Sanders (I-VT) is planning a series of hearings at the Budget Committee beginning with the February 25 "Should Taxpayers Subsidize Poverty Wages at Large Profitable Corporations?" The Washington Post reported, "On March 17, Sanders is planning a hearing on income and wealth inequality, followed by a March 24 hearing on 'making corporations and the wealthy pay their fair share of taxes' and an April 14 hearing on the costs of climate change," and said Sanders will use hearings to lay the groundwork for including tax increases in future bills. The story said Sanders expects the next major Democratic bill, on infrastructure, "to address 'structural problems' facing the country, including addressing student debt, remaking the federal tax regime and 'transforming our energy system,'" but noted bill parameters must be negotiated with other Democrats.
COVID relief: The next step for the $1.9 trillion COVID bill is assembly of the 12 committee-passed elements by the House Budget Committee on February 22, then on to the Rules Committee before a full House vote late in the week or over the weekend, after which it will probably be brought straight to the Senate floor with a focus on issues like whether the minimum wage increase to $15/hour can stay in. President Biden on CNN Tuesday night signaled a willingness to negotiate a phase in of the increase to, at first, $12 or $13 an hour, but was reported as earlier telling governors he doesn't think a wage hike can be done in the current bill because of reconciliation rules. Senator Kyrsten Sinema (D-AZ) has voiced opposition, saying the provision is not a budget item and not appropriate for reconciliation, and Senator Joe Manchin (D-WV) wants something closer to $11/hour. The Wall Street Journal (WSJ) reported, "Senate rules require that measures passed under it must have budgetary effects that aren't merely incidental to the policy aims. It isn't clear that raising the minimum wage will be considered permissible." In a February 15 letter to Chairman Sanders, who's making a case for the provision, the CBO said the wage hike encompasses a broader range of behavioral effects and affects a broader range of budget functions than provisions to nullify the ACA individual mandate and allow ANWR drilling included in the TCJA, which passed under reconciliation. The WSJ reported February 17, "Senate Democratic staff have started holding preliminary meetings with the parliamentarian … to review the text of the House bill. They have offered some early materials on raising the minimum wage to the parliamentarian, who hasn't yet indicated whether it will be acceptable under reconciliation … More formal meetings and arguments on whether to include the minimum wage as part of the bill are expected next week."
Bills of interest:
Below is a timeline for guidance projects released by the IRS related to the TCJA.