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The infrastructure plan emerging from a bipartisan group and backed by at least 21 senators is facing challenges in terms of the viability of pay-fors and timing, as the Administration wants a signal about the odds of success soon, but negotiations could last a while longer. Democrats on their own are discussing a package of their priorities, including a Medicare expansion, of as much as $6 trillion that would be paid for by perhaps about half that much in tax increases. The two efforts are being discussed on parallel tracks.

Punchbowl News reported Senator Rob Portman (R-OH), a leader of the bipartisan group that is discussing $579 billion in new spending for a total package of $1.2 trillion, as saying the talks to nail it down could take weeks. “We’re working overtime to get the language, to get things in a position to get the right result. We don’t want to rush it and get things wrong. We’re going to take our time and do it right,” Portman said. “I heard someone say this week, quoting [White House Counselor Steve] Ricchetti, ‘You have to do it in seven to 10 days.’ I was like, ‘Huh, no we don’t’ … We’re not going to. We shouldn’t. That would be bad.”

Politico reported that a recent, tentative menu of pay-fors includes: 1) Infrastructure financing authority to leverage private investment; 2) Public-private partnerships, private activity bonds, and asset recycling; 3) Direct-pay municipal bonds for infrastructure investment; 4) Reduce the IRS tax gap; 5) Redirect unused UI relief funds; 6) Repurpose unused Covid relief funds for infrastructure; 7) Expand eligible uses of Covid state/local funds; 8) Allow use of toll credit balances for infrastructure; 9) Annual surcharge on electric vehicles; 10) Index gas tax to inflation (placeholder pending alternative non-tax offset from Administration); and 11) Adjust customs user fees. In addition to the gas tax provision, the White House also doesn’t support EV fees.

Senate Majority Leader Chuck Schumer (D-NY) continues to signal that Democrats could reach a bipartisan agreement on infrastructure then do a larger package of Democratic priorities under reconciliation. Politico reported June 17 that “Senate Democrats are weighing spending as much as $6 trillion on their own infrastructure package if the chamber’s bipartisan talks fail” and that “Senate Budget Chair Bernie Sanders (I-Vt.) has been pushing for an aggressive approach to the infrastructure talks and is angling to insert a large expansion of Medicare into Democrats’ plan.” It is envisioned that about $2.5 trillion in pay-fors would fall under the jurisdiction of the Senate Finance Committee (SFC), the report suggested.

“Democrats discussed potentially including measures to expand Medicare, including lowering the eligibility age to 60 and expanding benefits for all beneficiaries to cover dental, hearing and vision care…” the New York Times (NYT) reported. “Broadening Medicare has long been a priority of Senator Bernie Sanders.”

Global tax – The G7 and OECD efforts toward a global tax agreement were front and center during two hearings in the tax-writing committees with Treasury Secretary Janet Yellen this week. During the June 16 SFC hearing, Ranking Member Mike Crapo (R-ID) asked about the proposed 15% global minimum tax at the OECD but raising the GILTI minimum tax rate to more than 26% (given the FTC haircut). Sec. Yellen said if the US is able to make progress domestically on reforming GILTI, which she said needs to be on a country-by-country basis rather than on a blended basis, and moves in the direction we ask other countries to, there is a good chance for countries to agree by the time of the G-20 summit in October.

Similarly asked about setting the GILTI rate higher than a global minimum tax during the June 17 House Ways & Means hearing, Sec. Yellen said, “With the global minimum tax of at least 15%, the gap between the U.S. tax on foreign earnings and the tax that's imposed by other jurisdictions will actually be narrower, with a GILTI of 21% than the gap is today, with a global minimum tax of zero. So these proposals would – with 15% abroad, 21% here, if that’s how it goes, we would have a narrower gap than we have today.”

At the SFC, Sec. Yellen said for countries unwilling to adopt a minimum tax, “We’re proposing changes to the [BEAT] to make it more effective and to deny foreign corporations in the United States the deductions that enable them to shift their profits offshore.”

A June 16 Wall Street Journal story on the proposal to replace BEAT said the SHIELD “aims to leverage the size of the U.S. consumer market to give other countries a choice: impose a minimum tax or watch the U.S. tax your companies and take your revenue.” The plan faces hurdles in Congress and resistance from other governments and MNCs and is more aggressive than what other countries might do as part of their minimum taxes – denying full deductions while other countries would just top companies up to the minimum tax rate, the report said. “‘That is a very blunt instrument,’ said Barbara Angus, former chief tax counsel for the Republicans on the House Ways and Means Committee, now at Ernst & Young LLP.”

Health care – On June 17, the Supreme Court ruled 7-2 to reject a challenge to the ACA, holding that the plaintiffs had not suffered the sort of direct injury that gave them standing to sue. The case was brought by Republican attorneys general who said the mandate requiring health insurance coverage became unconstitutional after Congress eliminated the penalty for failing to obtain coverage in the 2017 TCJA, arguing that the mandate could no longer be justified as a tax.

The NYT reported, “The waning repeal effort has given Democrats their first chance in a decade to press forward on a new campaign: moving the country toward a system of universal health coverage,” though “Democrats are still divided over many leading proposals” and such efforts “are complicated, with potentially high costs, difficult policy trade-offs and the risks of industry opposition.”

Energy – The Joint Committee on Taxation released a technical description of the Clean Energy Act marked up by the SFC May 26 (it received a tie 14-14 vote but can be brought to the floor.)

Trade – The SFC trade subcommittee holds a hearing on “The Strategic Benefits of a Multilateral Approach to Trade Policy in the Asia-Pacific Region” on Tuesday, June 22.

Today, June 18 (12:00 p.m. ET) is the EY Webcast, “Tax in the time of COVID-19: Update on legislative, economic, regulatory and IRS developments.” Register

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