April 26, 2021
What to expect in Washington (April 26)
The Washington Post April 24 reported of President Biden’s American Families Plan, “The key components of the plan consist of roughly $300 billion in education funding, the biggest pot of which includes funding to make two-year community colleges tuition-free; $225 billion in child-care funding; $225 billion for paid family and medical leave; $200 billion for prekindergarten instruction; and $200 billion to extend more enhanced Affordable Care Act subsidies,” plus extending the expanded child tax credit until 2025 and extending the expanded EITC. “The key tax changes are expected to include increasing the top tax rate from 37 percent to 39.6 percent; taxing investment gains from capital income at ordinary wage rates for those earning more than $1 million; and imposing a higher tax on assets when they are transferred at death, among other provisions,” the report said.
The Post said it was “a potential last-minute change” to include about $200 billion to extend an increase in health insurance subsidies through ACA exchanges, but the White House is “set to scrap a plan included in earlier drafts of their proposal to include as much as $500 billion in savings from the prescription drug industry.”
Politico reported of President Biden’s address to a joint session of Congress April 28, “The biggest fight in the run-up to the address is over health care. There are two critical issues for the White House: 1) whether to include a longtime Democratic promise to allow the government to negotiate prescription drug prices, which would save nearly $500 billion over 10 years, and 2) what to do with those savings. Some Democrats, led by Washington Rep. Pramila Jayapal and Vermont independent Sen. Bernie Sanders, want to plow the money into expanding Medicare. Others, led by Speaker Nancy Pelosi, want to use it to shore up the ACA."
The major question with regard to President Biden’s agenda is whether he can reach a deal with Republicans on infrastructure investment items under the Jobs Plan and move that part on a bipartisan basis, with the Families Plan portion to move separately under budget reconciliation; or whether the Jobs and Families plan both advance under budget reconciliation, together or separately, with support from both progressives and moderates, who may want some of the tax proposals pared back.
American Jobs Plan – On CNN's State of the Union April 25, Senator Joe Manchin (D-WV) called a $568 billion infrastructure plan put forward by some Senate Republicans last week “a good start… And this is the way we start negotiations…and it’s not the finishing line.” He said of traditional infrastructure and other parts of the Jobs Plan, like $400 billion in funding for care for the aging and disabled, “I do think they should be separated, because, when you start putting so much into one bill, which we call an omnibus bill, makes it very, very difficult for the public to understand.” He said with regard to human infrastructure, “when you think about all that we have done in the last year, and plus the COVID bill this year, American Rescue Plan, an awful lot has been done in there.”
He was confronted with the point that “one in five children in your home state of West Virginia live in poverty. So, do you think that raising taxes to help those who need it most is doable?” Manchin said, “I think we can find a balance,” but also said narrowing the $400 billion-$1 trillion annual tax gap “should be explored before we start just raising taxes exponentially.”
Senate Environment & Public Works Ranking Member Shelley Moore Capito (R-WV), who put forward the Republican infrastructure plan, said on the same program, “where I think the first starting point we need to have is, let’s do an apples-to-apples comparison of the physical infrastructure, core infrastructure of his plan with how it matches up with what we have put forward.” Asked whether any tax hike would be acceptable, she said, “I think it’s important for folks to know how we have paid for the ideas we have on the table – we have got, of course, the gas tax, which is the trust fund, which is a declining resource. We also have user fees. We have folks using our roads and bridges and other infrastructure that aren't really paying in for the maintenance and use of those highways. That would be electric vehicles or hydrogen or some hybrid. So, we build that into [the] formula.”
The Wall Street Journal reported, “Despite flickers of bipartisanship, the parties remain far apart on infrastructure and other issues as Mr. Biden nears his 100th day in office and seeks to press his agenda, including a next wave of spending on antipoverty and education programs he wants to be paid for by higher taxes on the wealthy. A person familiar with the plan said Sunday it will cost about $1.8 trillion…”
Congress – House Republicans are holding a retreat in Orlando. The next two weeks will be House Committee Work Weeks, meaning hearings and committee business will be held but no floor votes. Senate business this week includes S. 914 (Safe Drinking Water Act) and nominations at OMB, the EPA, and Department of Defense.
Culture – Ernst & Young LLP and Carnegie Hall are pleased to present a special musical program in recognition of the longstanding EY support of Carnegie Hall. This program explores the enduring appeal of Beethoven with performance excerpts by The Philadelphia Orchestra. Our special virtual program, for EY professionals and clients, will be on Monday, May 10, at 5:30 p.m. Register.
Friday, April 30 (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.