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This week (July 26 - 30)

Congress: The House and Senate are in session. It is the last scheduled week in session for the House before the August recess, while the Senate is scheduled to be in for two more weeks. Recess plans could change due to the infrastructure bill and budget resolution.

The plan had been for the infrastructure bill to be considered the week of July 26 and the budget resolution the week of August 2. Punchbowl News reported that Senator Thune said an infrastructure measure could take 10 days to process, after which the Senate would presumably move to the budget resolution. That could leave the August 9 recess week in jeopardy. House Majority Leader Steny Hoyer (D-MD) said this week he expects the House recess to begin July 30 as planned, but that members could be brought back to vote on what the Senate passes.

The Senate Finance Committee is holding two hearings:

• On Tuesday, July 27 (9:30 a.m.), "Implementation and Enforcement of the United States — Mexico — Canada Agreement: One Year After Entry into Force ." The Committee invited private sector witnesses to testify, including representatives from the steelworkers union, agriculture and the biotech sector. No government witnesses are scheduled to testify.
• On Wednesday, July 28 (10 a.m.), "Building on Bipartisan Retirement Legislation: How Can Congress Help ?" Witnesses include representatives of the ERISA Industry Committee, American Retirement Association, and AARP, plus the Oregon State Treasurer.

Last week (July 19 - 23)

Infrastructure: After a Senate procedural vote on an as-yet-unreleased infrastructure bill failed, the bipartisan Senate group that struck a high-level deal with President Biden a month ago is now aiming for Monday to have the bill text finalized, amid lingering issues. "I think we'll get it done over the weekend, and then I hope that we get another cloture vote next week, and that will succeed," Senator Mitt Romney (R-UT) said, Politico reported. Senator Joe Manchin (D-WV) said pay-fors for the plan "are pretty much lined up," Bloomberg reported in a story that said a delay of the previous administration's Medicare rebate rule has been added to the package. Other issues remain unresolved, including transit funding, which Senator Rob Portman (R-OH) said could be omitted from the plan in light of what he said were unreasonable demands from Democrats, prompting some Democrats to say they will oppose the bill if the funding is left out. The Hill reported Banking Committee Chairman Sherrod Brown (D-OH), who is leading the effort for transit funding that falls under his committee's jurisdiction, as saying Republicans are slow-walking the infrastructure effort. Other Democrats complained that some previously settled issues were being relitigated, which is what happened with the IRS tax gap funding pay-for that is now out of the package. Portman said earlier in the week the increased budget for IRS enforcement was out of the proposal because of pushback from other Republicans, and "we found out that the Democrats were going to put a proposal into the reconciliation package which was not just similar to the one we had, but with a lot more IRS enforcement … So, that created quite a problem … " On that matter, a July 23 New York Times story said "beefing up the Internal Revenue Service to catch tax evaders has resurfaced old resentments for Republicans, whose distrust of the agency has simmered for years, erasing hopes of a bipartisan legislative accord built on narrowing the so-called tax gap."

Reconciliation bill: Budget Committee Chairman Bernie Sanders (I-VT) said July 21 he did not yet have the support of all 50 Senate Democrats to move forward with an FY2022 budget resolution that could provide for a $3.5 trillion health/climate/caregiving bill to move with Democrat-only support under reconciliation. Sanders said he hoped the budget proposal could be ready for a floor vote "by early August," Bloomberg reported, adding there are "50 different members and 50 different sets of priorities." While the infrastructure procedural vote failed to expedite the process and budget negotiations among Democrats continue, Senate Majority Leader Chuck Schumer (D-NY) reiterated on the Senate floor July 22, "I have every intention of passing both major infrastructure packages — the bipartisan infrastructure framework and a budget resolution with reconciliation instructions — before we leave for the August recess." There is plenty of interaction between the two. House Speaker Nancy Pelosi (D-CA) reiterated July 22, "We will not take up the infrastructure bill until the Senate passes reconciliation," meaning the $3.5 trillion bill, not the budget resolution that unlocks the reconciliation mechanism. That could keep the two-track agenda in Congress going for months longer. With regard to the reconciliation bill, it remains unclear how much revenue will need to be raised by the House and Senate tax committees. Senate Finance Committee Chairman Ron Wyden (D-OR) and other Committee members have released some tax increase proposals consistent with those of included in the Biden administration's FY 2022 budget, including an international tax framework. However, the House Ways & Means Committee mostly has not tipped its hand as to how it might meet a revenue target, and Chairman Richard Neal (D-MA) has said he will remain guarded until there is a better sense of what can pass Congress.

199A: Chairman Wyden introduced his latest tax increase bill July 20. The Small Business Tax Fairness Act (S. 2387) would phase out the IRC Section 199A deduction to individuals earning over $400,000, consistent with the Biden administration's pledge not to increase taxes on those earning under that amount. A press release said, "the bill would expand eligibility for middle-income services business owners by removing arbitrary restrictions on which industries qualify and which don't" and "would establish one threshold for determining whether the taxpayer gets the deduction and one simple definition of qualified business income that applies to all taxpayers." Law360 reported that Chairman Wyden "estimated that eliminating the deduction for those earning more than $500,000 per year for four years would raise about $147 billion and that the revenue would pay for the 'relatively modest' cost of expanding the deduction to more small businesses." Despite targeting the deduction during the campaign, President Biden's FY2022 Budget Treasury Green Book does not include a proposal addressing the 199A deduction.

Capital gains: A July 21 Washington Post editorial, "The smartest way to make the rich pay is not a wealth tax," said the best approach is "one endorsed in 2018 by economists at the Organization for Economic Cooperation and Development (OECD): significant, broad-based taxes on capital gains, coupled with similarly efficient levies on transfers of wealth through gifts and inheritance." It said, "The higher capital gains rate should be applied to a broader base of investment income" and the "big money" is in eliminating stepped-up basis.

Debt limit: The Congressional Budget Office (CBO) this week gave lawmakers some breathing room on addressing the federal debt limit, Treasury Secretary Janet Yellen urged Congress to act ASAP, and Republican senators said they are not willing to easily agree to an increase or suspension. In a July 23 letter to congressional leadership, Secretary Yellen said, "The period of time that extraordinary measures may last is subject to considerable uncertainty due to a variety of factors, including the challenges of forecasting the payments and receipts of the U.S. government months into the future, exacerbated by the heightened uncertainty in payments and receipts related to the economic impact of the pandemic." She also said, "In recent years Congress has addressed the debt limit through regular order, with broad bipartisan support." The Wall Street Journal quoted Senator John Thune (R-SD), the Republican whip, as saying, "I don't think there's a single Republican senator who views increasing the debt limit so that Democrats can expand government and spend massive amounts as something they in the end would want to support." Senator Wyden challenged that view, saying, "We have Covid debt, we have Trump debt, we've got a double standard, and we want to make it clear nobody is going to hold the American economy hostage, period, full stop." CBO on July 21 said, "Treasury would probably run out of cash and be unable to make its usual payments starting sometime in the first quarter of the next fiscal year, most likely in October or November." The debt limit could be addressed in the $3.5 trillion reconciliation bill Democrats want to provide for in the budget resolution, but there is no guarantee that will come together in time. Some analysts have suggested the debt limit could be addressed as its own reconciliation bill. As the Congressional Research Service notes, "as many as three measures could qualify for consideration under expedited reconciliation procedures in the Senate — but no more than one each for spending, revenue, and the debt limit."

Climate: Informal summaries of what a $3.5 trillion Democrat-only reconciliation bill would provide for have referenced polluter import fees as a pay-for, without any additional detail. Senator Chris Coons (D-DE) has introduced a bill (S. 2378) to establish a border carbon adjustment (BCA) on polluting imports that leaves many of the details to be filled in by Treasury. The BCA would impose a fee on carbon-intensive products when they reach the border, and is intended to "incentivize investments in cleaner technologies and account for the cost of complying with U.S. laws and regulations on greenhouse gas emissions," according to a press release. The New York Times reported that the bill would raise between $5 billion and $16 billion annually, was drafted with Treasury input, and may be provided for under the as-yet-unreleased FY2022 budget resolution. Special Presidential Envoy for Climate John Kerry said July 21 the Biden administration hasn't decided whether to impose a tariff on carbon-intensive imports from China and other countries to fight climate change and is still evaluating such a proposal, Bloomberg reported. "We want to genuinely understand the implications taken by one group of countries or one country and how does that affect the overall dynamics of what we're trying to do on climate as well as how does that affect already very tricky trade waters," Kerry said.

Trade: USTR announced July 20 its intent to join the WTO plurilateral services talks with the goal of reaching an agreement to lower trade barriers to services trade by the WTO 12th Ministerial Conference (MC12) scheduled for November. Additionally, Treasury Secretary Yellen this week announced that the U.S. had reached a settlement with Vietnam concerning a section 301 trade investigation into that nation's currency practices that was initiated by the Trump administration.

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