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The Senate Parliamentarian late February 25 ruled the minimum wage increase to $15/hour in President Biden's $1.9 trillion "American Rescue Plan" COVID relief bill moving through Congress violates budget reconciliation rules because the budgetary effect is merely incidental to the non-budgetary policy change. President Biden said weeks ago he suspected the provision may not be able to stay in due to rules of the reconciliation process that allows Senate passage with 51 rather than 60 votes, which may well be necessary given the lack of any apparent Republican support. The White House has signaled it respects the decision, and Chief of Staff Ron Klain said on MSNBC Wednesday there are no plans for VP Harris, presiding over the Senate, to ignore the ruling, despite progressives' entreaties to take that rarely used step.

The wage provision will stay in the bill the House plans to approve today, Speaker Nancy Pelosi (D-CA) tweeted. Senate Majority Leader Chuck Schumer (D-NY) said, "We are not going to give up the fight to raise the minimum wage to $15 to help millions of struggling American workers and their families." Both Senate Finance Committee Chairman Ron Wyden (D-OR) and Budget Committee Chairman Bernie Sanders (I-VT) said they want an amendment to impose a tax penalty for corporations that don't pay $15/hour. (Wyden specifically wants a 5% penalty on corporations' total payroll if workers earn less than a certain amount and an income tax credit of 25% of wages to small businesses that pay higher wages.)

The Washington Post reported, "One possibility is to find compromise at a lower level — Manchin has endorsed $11 an hour — and then to try to get it in the bill in a different way, for example by crafting it more narrowly."

There are reportedly also pending parliamentary rulings regarding COBRA subsidies and multiemployer pension provisions. Politico reported that the bill's provisions for Child Tax Credit payments sent out by the IRS could also run afoul of reconciliation rules.

Senator Sanders held a hearing on the wage issue yesterday showcasing partisan differences: Democrats and some witnesses called for wages people can live on and stimulate the economy by spending in their communities, and Republicans and other witnesses said a mandated wage hike will break businesses struggling in the pandemic and that, with no new revenue source, paying it will just involve a redistribution.

While Democratic leaders support the wage increase, the issue exposes divisions within the party, with questions about how far progressives, who are outspoken in calling for the Senate to ignore the Parliamentarian's ruling, are willing to go to fight for the issue. The bill will move from the House to the Senate, where it is more likely to be amended and, if so, a conference process to resolve differences may be necessary before the bill is sent back to the House for final approval before the President's signature. The wage setback could also heighten calls for Senate filibuster repeal. Moderate Senators Kyrsten Sinema (D-AZ) and Joe Manchin (D-WV) had expressed skepticism over the wage hike — Sinema saying it had no role in a budget reconciliation bill, and Manchin calling for something closer to $11/hour — and they are the same senators who are on record as saying they oppose filibuster repeal.

Build Back Better — Another issue that could expose a rift among Democrats is the extent to which tax increases are included in the infrastructure-plus bill that President Biden aims to outline following enactment of the COVID bill and push through Congress over the spring and summer. Progressives are reportedly still deciding which tax increases to push for to pay for the likely multitrillion bill, but White House officials reportedly said it could be mostly deficit-financed.

Ways & Means Committee Chairman Richard Neal (D-MA) has repeatedly entertained that prospect, including in a February 25 article in The Hill newspaper in which he "expressed concern that attaching tax increases to the infrastructure bill that Democratic leaders plan to move could send Republicans and Democrats into 'their corners.' He noted his committee purposely did not include revenue raisers in the Green Act, a renewable energy bill, which Democrats reintroduced this month, to avoid a bitter fight over funding it." The Chairman reiterated he agrees with Treasury Secretary Yellen that caution must be taken regarding tax increases in the pandemic and recovery.

On the non-tax elements of the forthcoming Build Back Better plan, the exact scope is still unsettled but transportation committee leaders are putting an emphasis on specific projects in lawmakers' districts and reviving earmarks, or funding for specific projects or programs, which have been absent in Congress for about a decade. Punchbowl News observed, "Allowing earmarks could make it easier to pass this bill. It could give lawmakers a chance to list the projects in their district that need federal cash and give them more political buy in to the package."

Specific projects were mentioned during a February 24 Senate EPW hearing on infrastructure, which featured testimony from high-profile governors Gretchen Whitmer (D-MI) and Larry Hogan (R-MD). EPW Ranking Member Shelley Moore Capito (R-WV) implored Democrats to proceed in a bipartisan way and not use the multitrillion package to pursue ideological policies. Senate Republicans have criticized previous Democratic efforts for their emphasis on clean energy. The Finance Committee will oversee funding.

Tax — In a February 25 letter, business groups expressed strong support for the Main Street Tax Certainty Act of 2021, to make permanent the Section 199A 20-percent deduction for qualified business income.

Senate — The Senate is out until Monday, and the first roll call votes next week are Monday at 5:30 p.m. on nominees to head the Education (Cardona) and Commerce (Raimondo) departments. Democrats want the COVID relief bill enacted before pandemic UI programs expire March 14, creating the expectation they will act fast to get the bill onto the Senate floor for what could be a lengthy and contentious consideration.

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