September 15, 2021
What to expect in Washington (September 15)
The House Ways & Means Committee September 14 completed the first day of its markup of the tax and drug pricing portion of the Build Back Better Act reconciliation bill, defeating a host of Republican amendments and adopting none, and the markup is set to wrap up today. The Energy & Commerce Committee also continues its markup today amid questions about whether some Democrats on the panel will support Medicare prescription drug pricing provisions. Reps. Kurt Schrader (D-OR), Kathleen Rice (D-NY) and Scott Peters (D-CA) all indicated yesterday they won’t support the provision, which would cause a tie and withhold the majority needed to approve legislation.
More broadly, Senate Majority Leader Chuck Schumer (D-NY) said Democrats discussed their approach to budget reconciliation during the regular Tuesday policy lunch, with Committee chairs presenting overviews of proposals. It isn’t clear when or how Senate proposals will be unveiled, and it’s possible that negotiations with the House will proceed behind closed doors for a while beforehand, with an eye toward determining what moderates can support. Senator Schumer said “there were four committees that haven’t agreed with their House counterparts. But we’re … moving forward and it's going to be a lot of intense discussions and negotiations over the next few weeks.”
The Wall Street Journal reported, “Democrats on Capitol Hill have hard choices to make if they want to pass a sprawling package of healthcare, education and climate-change programs without any GOP support. So far, they have avoided making them. Centrist Senate Democrats are raising concerns over Democratic leaders’ plans to assemble a package of $3.5 trillion in spending and tax cuts, even if offset by other sources of revenue and savings. Because Democrats cannot afford to lose a single vote from their own caucus in the evenly-split Senate, that means that overall spending level will likely have to come down, either by excluding or shortening the length of some proposed programs.”
House Speaker Nancy Pelosi (D-CA) told members in a Dear Colleague, “We are now prepared to continue negotiations with the White House and Senate to reach reconciliation on legislation that meets the everyday needs of the American people and that addresses the climate crisis. As you are aware, we have certain limitations in terms of Senate rules.” Punchbowl reported that the Budget Committee will assemble the committee portions next week and, “The bigger question is whether Pelosi holds onto the reconciliation legislation until a deal can be worked out with the Senate.”
There is widely expected to be a manager’s amendment at the Rules Committee to make changes to committee-reported portions of the bill, including potentially to the tax provisions. That prospect was the subject of a Sense of Congress amendment at Ways & Means, which was defeated, saying that issues like stepped-up basis and the SALT deduction cap shouldn’t be addressed after the Ways & Means Committee reports the bill. Other amendments addressed making the SALT deduction cap permanent for millionaires, withholding Superfund provisions if energy prices are high, and requiring that tax provisions not take effect until the unemployment rate is at its pre-pandemic level.
Many of the Ways & Means tax increases released September 13 can be broadly viewed as falling three categories:
Not included are changes to stepped-up basis, broad repeal of oil & gas tax incentives, and the SALT deduction cap, which could come later. “There were enough that raised questions about it,” Ways & Means Chairman Richard Neal (D-MA) said of stepped up basis changes, adding it probably couldn’t win the 218 votes to pass the House, Bloomberg Tax reported.
A September 13 New York Times story focused on the approach to taxing high-income individuals said, “House Democrats’ plans to raise taxes on the rich and on profitable corporations stop well short of the grand proposals many in the party once envisioned to tax the vast fortunes of tycoons” and instead “focused on traditional ways of raising revenue.” It noted the inclusion of the “mega-IRA” provision seen addressing situations like the ProPublica report of taking “a Roth individual retirement account worth less than $2,000 in 1999 and [growing] it to $5 billion, which could be completely shielded from taxation.”
International tax – Another NYT story, “Democrats Push to Join Tax Haven Crackdown,” said, “House Democrats, as part of their plan to raise as much as $2.9 trillion to finance President Biden’s social safety net package, proposed raising the tax rate on companies’ overseas earnings to 16.6 percent from 10.5 percent and calculating the tax on a country-by-country basis. The plan would meet the primary commitments of the global agreement that is being negotiated through the Organization for Economic Cooperation and Development. ‘This is more than just tweaks,’ said Craig A. Hillier, an international tax expert at Ernst & Young. ‘These are material moves being proposed on how foreign income is taxed.’”
As the story pointed out, “Treasury officials are continuing to work with their international counterparts to put the finishing touches on the global tax agreement so that leaders of the Group of 20 nations can sign off on the pact when they meet for a summit in Rome at the end of October. But many questions must still be resolved in the next six weeks.”
Debt limit – In the background of the reconciliation effort is the infrastructure bill, which faces a self-imposed House deadline for passage by September 27, and the expiration of government funding on September 30 and the need to address the federal debt limit before Treasury exhausts extraordinary measures to pay the nation’s bills, which is expected to occur in October.
Senate Republican leader Mitch McConnell (R-KY) said after his members’ regular Tuesday policy lunch that his party wouldn’t cooperate on the debt limit issue in light of the partisan reconciliation process: “Republicans are united in opposition to raising the debt ceiling. Not because it doesn’t need to be done … This year is unique, and as you all know I’ve been here a while. I’ve never seen such an effort to expand the reach of the federal government like we’ve been confronted with this year. Through not just one reconciliation process but apparently yet another. So, if they want to do all of this on a partisan basis, they have the ability and a responsibility to ensure that the federal government not default. And they will have to take care of that.”
Senator Schumer said: “Every member of my caucus agrees we cannot allow a government shutdown or a catastrophic default. To prevent both of these from happening, it will require bipartisan cooperation, just as we’ve done in the past for three - three times Democrats voted when Trump was President to renew the debt ceiling. We didn’t play games, we didn’t risk the credit of the country, we did it, and that’s been the history. Senator McConnell seems to be trying to break new ground by saying that we should let the country default. I’d ask you to ask each Republican senator, are they willing to vote to let the country default? Ask them. We’d also ask the business community to start weighing in on the danger to default to the entire economy, which will hurt every single person in this economy - our veterans, our elderly, our young people, you name it.”