March 26, 2021
What to expect in Washington (March 26)
President Biden is set to detail his Build Back Better in a March 31 speech in Pittsburgh, Punchbowl News reported, adding that the plan will be as described in press stories: broken into two separate bills, an infrastructure bill that could appeal to Republicans then another package with individual-focused proposals. The report said the pay-for proposed with the $2 trillion infrastructure bill is an increase in the corporate tax rate. The $1 trillion people-focused, "human infrastructure" bill — with items like free community college, universal preschool, national paid leave, long-term care, and a prescription drug overhaul — will be proposed to be paid for by increasing the top individual tax rate and ending the lower rate on carried interest. Biden has said a corporate tax rate increase to 28% would raise $800 billion and a top individual rate of 39.6% would raise $230 billion, so more tax increases would be required if the bills are to be completely paid for.
A March 24 New York Times analysis said, "Biden faces a strategic dilemma: how to pass as much of his potentially transformative agenda, as quickly as possible, through the narrow window afforded him by Democrats' thin margins in the House and Senate." It included speculation that, given that many Democrats see "little chance, if any, of a large bipartisan bill taking shape," the elements in the forthcoming two separate bills could ultimately be "rolled into an epic, single bill, perhaps costing $3 trillion and offset in part by tax increases on corporations and the rich, which would pass with only Democratic votes."
The Hill newspaper reported March 24, that Senator Chris Coons (D-DE), a Biden ally, and White House advisers want Congress to first move "a smaller infrastructure bill in hopes of securing a bipartisan win before trying to address more ambitious goals on climate change and health care in a subsequent measure. They are aiming to secure at least one big bipartisan accomplishment before" battling over more partisan issues, but it's unclear whether Republicans will give Biden a bipartisan victory knowing what's ahead.
Tax hearings — The groundwork for tax increases is being laid in Congress. During the March 25 Senate Finance Committee international tax hearing, Treasury Deputy Assistant Secretary Kim Clausing (Tax Analysis) and witness Chye-Ching Huang of NYU repeatedly made the case for changing TCJA international tax provisions to remove incentives for offshoring, and for corporate tax increases generally to pay for infrastructure investment, saying companies benefit from that as well. The hearing framed the debate between the Administration/congressional Democrats vs. Republicans/the business community over dramatically changing TCJA international provisions, including raising revenue from changes to the global intangible low-taxed income (GILTI) provisions, the base erosion and anti-abuse tax (BEAT), and the foreign derived intangible income (FDII) rules. Other witnesses and Republican committee members suggested there's no need to change the provisions and that increasing US taxes would reignite interest in inversions.
Chairman Ron Wyden (D-OR) said he will in coming days, joined by Senators Sherrod Brown (D-OH) and Mark Warner (D-VA), release a framework for international taxation that reverses TCJA provisions for US-based multinationals who "must pay a fair share," rewards companies that invest and create good-paying jobs in the US, and stops rewarding companies that ship jobs and factories overseas. EY Tax Alert 2021-0628 has details.
At a Senate Budget Committee hearing yesterday, Chairman Bernie Sanders (I-VT) announced an estate tax bill (S. 994) to "demand that the families of the billionaire class … start paying their fair share of taxes" through a bill to establish a progressive estate tax rate and other changes. Under the bill, the estate tax is:
Sanders said he was also introducing the Corporate Offshore Tax Dodging Prevention Act (S. 991) to prevent corporations from shifting profits offshore and to restore the corporate tax rate to 35%.
Congress — The Senate March 25 confirmed by voice vote the nomination of Adewale Adeyemo to be Deputy Secretary of the Treasury. The Senate also passed 92-7 the House-passed PPP Extension Act of 2021 (H.R. 1799) to extend the PPP application deadline from March 31 to May 31 and require the SBA to process applications by June 30. Now, both chambers are out of session for two weeks. The next Senate vote will occur at 5:30 pm on Monday, April 12.
During a March 25 press conference, President Biden continued to express an inclination toward the "talking filibuster" in the Senate, to require opposing members to stay on the floor, rather than the current version that allows other business to be conducted while bills are being held up. "I strongly support moving in that direction," he said, and expressed openness to more: "if we have to, if there's complete lockdown and chaos as a consequence of the filibuster, then we'll have to go beyond what I'm talking about."