May 10, 2021 What to expect in Washington (May 10) President Biden is holding at least three meetings with lawmakers this week focusing on his American Jobs Plan infrastructure proposal. On Wednesday, May 12, he hosts House Speaker Nancy Pelosi (D-CA), Republican leader Kevin McCarthy (R-CA), Senate Majority Leader Chuck Schumer (D-NY), and Republican leader Mitch McConnell (R-KY) at the White House. The Wall Street Journal (WSJ) reported that a meeting with moderate Republican senators led by Senate Environment & Public Works Ranking Member Shelley Moore Capito (R-WV), who have a $568 billion infrastructure plan without TCJA rollbacks, is on Thursday. Democrats must decide how much patience to have in courting GOP support for what clearly would be a smaller, more traditionally focused infrastructure bill before potentially pulling the plug on those negotiations and moving to a more partisan approach that would require moving a larger bill under budget reconciliation. The WSJ said, “President Biden faces a crucial test this week of whether he can find any common ground with Republicans as he pushes trillions in spending on infrastructure, child care and education.” Looking at the timeline going forward, the article noted, "Speaker Pelosi has set July 4 as an informal target for passing infrastructure legislation in the House, though some Democratic aides expect that timeline to slip.” Some Democrats have questioned how Republicans presented the $568 billion in spending in their two-page infrastructure outline, the WSJ reported, saying that it includes baseline federal transportation funding in its total, while the White House plan calls for spending on top of that. “I don’t believe that that is a serious proposal,” said Rep. Norma Torres (D., Calif.), who has recently met with Mr. Biden at the White House. Significantly, Senator McConnell said in a local PBS interview that he is willing to accept an infrastructure package of between $600 billion-$800 billion, after previously signaling $600 billion was a ceiling, paid for with a gas tax increase, Punchbowl reported. While the current posture is Democrats reaching out to Republicans to see if a deal can be struck, Senator McConnell believes it’s the other way around, with Democrats determining if they have unified support among themselves or need to compromise. “I think they’ll see if they can pass this thing by getting everybody in line, if they can’t, then we’re open to talk about infrastructure and how to pay for it,” he said. Axios reported that President Biden will discuss his infrastructure proposal with Senate Environmental and Public Works Committee Chairman Tom Carper (D-DE) at the White House today. Carper, who has a Delaware connection with Biden, “has been working closely with Capito and other Republicans on a separate transportation reauthorization bill. Carper and other Democratic members see this bill as a realistic way to finding a compromise with Republicans on infrastructure, given the measure must pass and focuses on areas of overlap between the two parties.” A “fact checker” column in the May 9 Washington Post said on the tax element of President Biden’s other “human infrastructure” proposal, almost half of the revenue for the Families Plan, $700 billion, is supposedly the result of more rigorous tax enforcement targeting the tax gap. The Penn-Wharton Budget Model estimates Biden’s proposal would raise only $480 billion, while former IRS Commissioner Charles Rossotti thinks as much as $1.4 trillion could be recovered over a decade. Current IRS Commissioner Rettig estimates that the gap may be $1 trillion per year in the age of cryptocurrency. In several respects, more details on proposed tax increases are needed by the Administration for a complete analysis. “Quite frankly, until the administration presents a fiscal year 2022 budget that lays out their year-by-year spending and revenue assumptions, we are all in the dark,” said G. William Hoagland, senior vice president at the Bipartisan Policy Center and a former staff director of the Senate Budget Committee. A WSJ article discussed the effects on private equity of President Biden’s proposals to increase the corporate tax rate to 28% from 21% and raise capital gains rates for high-income earners, to 39.6% from 20%, which would effectively eliminate the favorable treatment of carried interest. “It remains unclear whether Congress will be willing to increase both the corporate rate and the capital-gains rate as high as Mr. Biden has proposed. But regardless, it is harder to see the tax system returning to a regime where capital gains are taxed at a rate substantially below the corporate income-tax rate,” it said. There are two tax hearings this week:
Health hearings include:
On Friday, May 14 (12:00 p.m. ET), 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. ———————————————
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