Tax News Update    Email this document    Print this document  

July 26, 2021

What to expect in Washington (July 26)

The bipartisan Senate group that struck a high-level infrastructure deal with President Biden more than a month ago is hoping to have bill text ready today, or at least this week. Senate Democratic leaders are trying to pass the infrastructure bill and an FY2022 budget resolution with instructions for a $3.5 trillion reconciliation bill on other Democratic priorities before the August recess. The debt limit looms in the background: it is reinstated August 1 and CBO says extraordinary measures can last until October or November, but Treasury wants it addressed ASAP.

Asked on Fox News Sunday whether the bipartisan group would have a bill ready today, Senator Mark Warner (D-VA) said, “I believe we will, because the one thing I hear and all across the Virginia the last couple of days, people want us to invest in our infrastructure … We’re down to the last couple of items, and I think you’re going to see a bill Monday afternoon.”

Transit funding remains a major sticking point. Senator Rob Portman (R-OH) said on ABC’s This Week, “We’re about 90% of the way there. I’m here this weekend. We’re going to legislate the language with colleagues and with staff, and I feel good about getting that done this week. We have one issue outstanding. And we're not getting much response from the Democrats on it. It’s about mass transit. Our transit number is generous. We increased transit in this a proposal. We also increased the formula going forward. That’s the one issue that’s outstanding frankly at this point.”

The Wall Street Journal reported, “Democrats said Sunday that other issues beyond transit were still being resolved, including details of broadband funding and a requirement that contractors on federally funded projects can’t pay their employees anything less than the locally ‘prevailing wage’ for their services” and “which leftover Covid relief funds previously passed by Congress could be tapped to help pay for the bill.”

The strength of the pay-fors will be scrutinized. “There are people who think this is Monopoly money, but it’s not, Jake. And, so, I’m concerned,” Senator Pat Toomey (R-PA) said on CNN State of the Union. “I think the way we should pay for this increase in infrastructure spending is by repurposing money we already approved but hasn’t yet gone out the door. But that’s a point of great contention with the Democrats. So, it’s not, to me, just the top line that matters. It's also how we’re funding it.”

Reconciliation – Regarding Majority Leader Chuck Schumer’s (D-NY) plan for the Senate to pass the infrastructure bill and a budget resolution with reconciliation instructions before the August recess, Senator Warner said, “I sure want to … After we’re done with the bipartisan bill, I would love to have some of my Republican friends join on the reconciliation effort... I would hope some Republicans would join us on that, but if not, I think the group of 50 Democrats will have to work through that resolution.”

Asked on ABC about her insistence the House will not pass the infrastructure bill until the Senate passes a reconciliation bill, Speaker Nancy Pelosi (D-CA) said “building the human infrastructure is really a part of building the physical infrastructure. So that’s why we will have something further to add. The deal is not as green as I would like it to be, the infrastructure bill, and I think that it’s something we could have passed a long time ago, even before the climate crisis was readily known to everyone. But nonetheless, I hope it will pass. I won’t put it on the floor until we have the rest of the initiative.”

Appearing on the program after her, Senator Portman said “what she has just said is entirely counter to what President Biden has committed to and what the Senate is doing, which is a two-track process. The infrastructure bill has nothing to do with the reckless tax-and-spend extravaganza that she’s talking about in terms of what reconciliation as she called it. So no, I’m not happy with what she said because it’s inconsistent with the agreement that we have on a bipartisan basis.”

Some Democrats insist that any major tax legislation include relief from the TCJA $10,000 SALT deduction cap. A July 25 Washington Post story on New Jersey said the state’s “concerns — which include restoring a major tax break used by about 40 percent of the state’s filers and protecting its powerful drug industry — are starting to conflict with the larger Democratic agenda of overhauling climate policy, reshaping the tax code and delivering new assistance to American families through a sweeping expansion of social programs.” The story said there are concerns that “Democratic leaders are targeting pharma revenue to offset large chunks of their broader spending agenda. The crux of their plan is to allow the government to use its massive purchasing power to negotiate drug prices with manufacturers.”

Debt limit – Asked about the prospect that Democrats might be forced to raise the debt limit on their own because Senate Republican leader Mitch McConnell (R-KY) and other Republicans have said they are not going to vote for it without spending changes, Speaker Pelosi said, “the debt limit had to be addressed three times under President Trump and Democrats cooperated two of the times, and then the third time was just a change of the date. And it’s so funny because [McConnell’s] always been there to be an obstruction to a Democratic president.” She said, “Let there be no question, we will address the debt limit.”

Senator Portman said of Republican objections to raising the debt limit, “I think it’s in the context of the reconciliation bill… you look back at what they're proposing here. It is, you know, it’s a huge new spending increase at a time when we have unprecedented levels of debt … and then the largest tax increase in American history. And these are tax increases that are not necessary.” He said the Congressional Budget Office has forecast that tax receipts are going to be higher than expected: “In fact, a 10% increase next year because the 2017 tax reform actually worked.”

Senator Portman said the debt ceiling “has to be raised because of these tax and spending policies. We need to insure we get the spending under control. So, typically, when we do a debt ceiling, as you know, there's attached to it some restraint on spending.” Reminded that there were no such restraints under President Trump, he said at least “under every president there is a discussion” of controlling the debt.

Hearings - The Senate Finance Committee is holding two hearings this week:

  • On Tuesday, July 27 (9:30 a.m.), “Implementation and Enforcement of the United States – Mexico – Canada Agreement: One Year After Entry into Force.”
  • On Wednesday, July 28 (10 a.m.), “Building on Bipartisan Retirement Legislation: How Can Congress Help?
  • On July 27 (10 a.m.), the Senate Health, Education, Labor and Pensions Committee holds a hearing on “The Path Forward: Building on Lessons Learned from the COVID-19 Pandemic.”
  • On Friday, July 30 (12:00 p.m.), is the EY Webcast, “Tax in the time of COVID-19: Update on legislative, economic, regulatory and IRS developments.” Register. 


Contact Information
For additional information concerning this Alert, please contact:
Washington Council Ernst & Young
   • Ray Beeman (
   • Gary Gasper (
   • Kurt Ritterpusch (
   • Heather Meade (