April 12, 2021
What to expect in Washington (April 12)
Congress is back after a two-week recess and the primary question is how Democrats can act on President Biden’s $2 trillion-plus American Jobs Plan infrastructure plan proposed to be paid for with corporate tax increases like a 28% rate, a new minimum tax on corporate book income, and changing TCJA international provisions. The President today meets with a bipartisan group of House & Senate members on the plan. Press Secretary Jen Psaki said April 9: “On Monday, he will meet with Democratic and Republican members of both the House and Senate to discuss the American Jobs Plan and the need for a bold, once-in-a-generation investment in America to put millions of people to work… It will be bipartisan and bicameral.”
Attendees are Reps. Don Young (R-AK), Donald Payne Jr. (D-NJ), Garret Graves (R-LA) and David Price (D-NC); and Senators Maria Cantwell (D-WA), Roger Wicker (R-MS), Deb Fischer (R-NE) and Alex Padilla (D-CA).
There are no signs that any Republicans are ready to sign on to an infrastructure plan anything close to what President Biden has proposed – because of the size, broad scope beyond traditional roads and bridges, and tax increases – and 10 GOP votes would be required for the bill to pass the Senate under the 60-vote filibuster threshold. “Only about 6% of the President’s proposal actually goes to what the American people … would describe as infrastructure,” second-ranking Senate Republican John Thune (R-SD) said on Fox News Sunday. “If they’re interested in roads and bridges and highways and perhaps broadband, there is a deal to be had there.” Moving the bill without Republicans would require changing the filibuster or, more likely, budget reconciliation with the votes of most House Democrats and all 50 Senate Democrats plus VP Harris.
Senator Joe Manchin (D-WV), a red-state moderate whose vote will be key in the 50-50 Senate, published a Washington Post op-ed April 7 saying “there is no circumstance in which I will vote to eliminate or weaken the filibuster;” he doesn’t believe “budget reconciliation should replace regular order in the Senate” (but doesn’t rule out using it); and Republicans “have a responsibility to stop saying no, and participate in finding real compromise with Democrats.” He said in an April 5 radio interview he backs a corporate tax rate of 25%, not 28% – the US “has to be competitive and we’re not going to throw caution to the wind” – the bill “needs to be changed,” and “there’s 6 or 7 other Democrats that feel very strongly about this.”
An analysis of the Manchin-focused outlook in Sunday’s Washington Post suggested that Democrats must weigh paying for the bill to assuage deficit concerns v. the risk for Democrats up for reelection in 2022 voting to raise taxes. It said there is “the expectation that it may have to be shaved back in size if not in overall structure;” some Democrats say passing an “ambitious” plan is better for the party in 2022 than a smaller bill or nothing at all; and that “depends in large part on whether Manchin will be there in the end…”
The White House submitted to Congress a $1.5 trillion FY2022 spending plan April 9. The full budget – expected to have more details on the Made in America Tax Plan (outlined in a March 31 fact sheet and April 7 report) and other tax items in a Treasury green book – won’t be released until later. An FY2022 budget resolution in Congress would unlock budget reconciliation for the infrastructure plan, and Senate Leader Schumer’s office has said a parliamentarian ruling allows multiple reconciliation bills under one resolution.
Tax – President Biden is set to detail a second plan, the American Families Plan, in coming weeks that’s likely to be paired with tax increases targeting individuals, perhaps including increasing the top rate and capital gains changes. The two bills could stay separate or be combined, and the expectation is that the Families plan will reflect predominantly Democratic issues, while infrastructure has broader support. House Speaker Pelosi said April 8, “I think we will have two bills. We will have this … infrastructure bill … it’s always been bipartisan or nonpartisan — that we will do so in a bipartisan way. If we have to go to reconciliation, that’s a lever, but I hope it’s not something that we need to do.”
In addition to the proposals in the Made in America Tax Plan, which accompanies the Jobs Plan, to change the GILTI, BEAT, and FDII TCJA international tax provisions, Senate Finance Chairman Wyden and Senators Brown and Warner have released the “Overhauling International Taxation” framework. A WCEY Tax Alert compares the Biden, Wyden, and other plans. Press Sec. Psaki said April 9, “We’ve heard a lot of different ideas on what the payfors should be. I think this is a good time to take those inputs on board [but] … it’s pretty hard to beat the vision that the President put forward.”
An April 11 New York Times story said, “Knowing that the measure will include tax changes to help pay for some of the plan, some moderate Democrats from high-tax states have pushed for a repeal of the so-called SALT cap…” It said, “others have warned that Mr. Biden’s proposal to increase corporate taxes to 28 percent from 21 percent is too steep” and Ways & Means Chairman Neal has “suggested bringing back Build America Bonds created after the Great Recession to help states and cities borrow money for infrastructure projects.”
Regarding timing for the Jobs Plan, Speaker Pelosi said House T&I Chairman Peter DeFazio (D-OR) “thinks that we can do our part in the House probably in the month of May, at least his committee would be ready at that time. I would hope that our part in that House would be largely done before the 4th of July. Whether the whole package can be done then, we just don’t know …. we want to do it before the August break.”
While attention is on the Senate, where a 50-50 split requires unanimous Democratic support (and the VP’s tiebreak) for reconciliation, House Speaker Pelosi can lose the votes of only 3 Democrats for bills to pass; 1 more GOP member (Letlow) is sworn in this week, making the ratio 218D-212R. In House vacancies:
WH chips mtg – Press Sec. Psaki said, “On Monday afternoon, National Security Advisor Jake Sullivan and NEC Director Brian Deese will host a virtual CEO Summit on Semiconductor and Supply Chain Resilience to discuss both the American Jobs Plan, as well as steps to strengthen the resilience of American supply chains for semiconductors and other key areas.” The chip shortage has caused issues for automakers and other industries. The Wall Street Journal said White House wants to “use Monday’s gathering as a platform for selling President Biden’s $2.3 trillion infrastructure proposal, which is facing opposition from Republicans and the business community given that it relies on increasing the corporate tax rate.”
On Friday, April 16 (12:00 p.m.) is the EY Webcast, Tax in the time of COVID-19: Update on legislative, economic, regulatory and IRS developments. COVID-19 and the resulting economic crisis have made reacting to tax developments more complicated than ever. Join us for the next webcast in our series as we discuss how businesses can navigate the tax policy environment and continue to effectively operate their tax function in this time of crisis and change. Panelists will provide updates on: (i) The US economy and tax policy; (ii) Breaking developments; and (iii) What’s happening at the IRS. Register.