March 1, 2021
What to expect in Washington (March 1)
The House passed the budget reconciliation bill reflecting President Biden’s $1.9 trillion “American Rescue Plan” COVID relief plan on Saturday morning, and now it’s on to the Senate. Punchbowl News reported this morning that the Senate substitute amendment for the House bill, intended to comply with reconciliation rules, will likely be brought to the floor on Wednesday. There are 20 hours of debate during which amendments will be offered, then a “vote-a-rama” of rapid-fire votes on amendments offered after debate time has ended. If the House bill is changed by the Senate, which is likely, a conference process to resolve differences may be necessary or, at the very least, another House vote will be required, which House leaders expect to happen next week. “If we act quickly and decisively, we can finally get ahead of this virus and get our economy moving,” President Biden tweeted Saturday.
The Senate Parliamentarian’s February 25 ruling that the minimum wage increase to $15/hour violates budget reconciliation rules because the budgetary effect is merely incidental to the non-budgetary policy change means that provision is likely to come out, and Democratic leaders are abandoning a fallback option to effectuate the increase through a corporate tax penalty because of administrative concerns and the March 14 target for enactment. “Economists and tax experts have said that the tax outlined by Sanders and Wyden could be easily avoided and difficult to implement, with large corporations able to reclassify workers as contractors to avoid potential penalties,” the Washington Post reported.
House progressives pushed for Senate Democrats to ignore the Parliamentarian’s ruling and retain the provision, and it’s unclear how they will react to the bill doing nothing on the minimum wage. The New York Times (NYT) reported Saturday, “Progressives in the House warned on Friday that they might withhold their votes for the stimulus package if the wage increase were removed. The debate has fueled an already simmering dispute over whether Democrats should try to abolish Senate rules, chiefly those governing filibusters that mandate a 60-vote threshold to move forward, that the minority party has long used to block major legislative initiatives.”
Other changes to the bill are possible, including changing the distribution of or scaling back the $350 billion in state and local funding. There are reportedly also potential parliamentary rulings regarding COBRA subsidies and multiemployer pension provisions, and the bill’s language on Child Tax Credit payments sent out by the IRS was modified to comply with reconciliation rules.
Beyond the virus and economy, swift passage of the American Rescue Plan will allow President Biden to move on to the Build Back Better plan, which he has been slated to detail later in March.
Budget – The President will also propose an FY2022 budget, and Democrats in Congress are expected to use the FY2022 budget resolution to carve out another opportunity to use the budget reconciliation process that allows simple-majority passage in the Senate. The White House has said the budget has been delayed due to insufficient cooperation from the previous administration.
Roll Call reported February 26, “House Budget Chairman John Yarmuth said Friday that President Joe Biden is not expected to submit his fiscal 2022 budget request to Congress until ‘mid-to-late April.’ The delay in Biden’s budget request will prevent Democrats from getting formally started on their next budget reconciliation bill. ‘So much is delayed because of OMB and the president's budget,’ Yarmuth, a Kentucky Democrat, said. ‘It wouldn’t start before we get the president’s budget. Now we're told it’s gonna be mid-to-late April.’
On reconciliation generally, MarketWatch reported on long-time aide Bill Dauster’s return to the Senate to staff the Budget Committee, and other experts viewing him as a formidable advocate as “other procedural challenges are likely to arise before the stimulus bill is passed or fails. And in a few months a second round of budget reconciliation is likely to begin, with infrastructure seen as the top priority.”
Health – An NYT story over the weekend, “At Last, Democrats Get Chance to Engineer Obamacare 2.0,” said “the Biden administration and a Democratic Congress hope to engineer the first major repair job and expansion of the Affordable Care Act since its passage. They plan to refashion regulations and spend billions through the stimulus bill to make Obamacare simpler, more generous and closer to what many of its architects wanted in the first place.”
Tax – Senator Elizabeth Warren (D-MA), now a Finance Committee member, has detailed her Ultra-Millionaire Tax Act to impose:
The NYT noted, “Unlike Ms. Warren, Mr. Biden pointedly did not endorse a wealth tax in the 2020 Democratic presidential primaries. But Ms. Warren is pushing colleagues to pursue such a plan, which has gained popularity with the public as the richest Americans reap huge gains while 10 million Americans remain out of work as a result of the pandemic.”
On Friday, March 5 (12:00 p.m. ET), is the EY Webcast Tax in the time of COVID-19: Update on legislative, economic, regulatory and IRS developments. The coronavirus (COVID-19) and the resulting economic crisis have made reacting to tax developments more complicated and more difficult. To determine what information your company needs to know now, join our panelists for a series of conversations about operating the tax function in this time of crisis and change. Panelists will provide updates on: (i) US economy, elections and tax policy; (ii) Breaking developments; and (iii) What’s happening at the IRS. Register.