September 24, 2021
What to expect in Washington (September 24)
Senate Majority Leader Chuck Schumer (D-NY) announced during a September 23 press conference with House Speaker Nancy Pelosi (D-CA) that, “The White House, the House, and the Senate have reached an agreement on a framework that will pay for any final negotiated agreement. So, the revenue side of this, we have an agreement on.” The announcement about the reconciliation bill followed a meeting between Schumer, Pelosi, Treasury Sec. Janet Yellen, Ways & Means Chairman Richard Neal (D-MA), and Finance Chairman Ron Wyden (D-OR). The Hill newspaper reported, “White House officials and congressional leaders have agreed that Wyden and Neal will use the House Ways and Means Committee’s tax proposal combined with a few ‘Senate ideas’ that were left out of Neal’s mark last week.”
Senator Schumer later called the agreement a “menu of options.” A topline spending number has not been agreed to, and that will determine how much tax revenue is needed and which options are included in a compromise bill. The spending and tax plans are still under discussion with moderate Democrats, who will greatly influence the package. “An aide to Sen. Kyrsten Sinema of Arizona, one such key moderate, told CNN that Sinema has not signed off on any tax proposal yet,” the network reported, and also that Senator Joe Manchin (D-WV) said he didn’t have details of the leadership/tax chairmen agreement and wouldn’t say whether he was close to setting an acceptable size for the bill – he is trying to figure out “what the need is.”
The Washington Post reported Chairman Neal as saying Democrats continue to discuss issues including new carbon taxes but have a tentative agreement on new bank reporting requirements, in a report noting that the two chairmen have long taken different approaches to various issues. “Wyden, for example, has sought to proffer significant changes to tax laws that govern foreign earnings, newly tax stock buybacks and raise money from wealthy executives and investors that avoid individual tax rates. The items had been left out of the House’s early bill, setting the stage for talks between the two committees and Biden administration officials…” the story said. “Exiting those meetings, Neal and Wyden stressed their staffs continue to work toward a final menu of options that will be presented to Democratic lawmakers in the days ahead.”
The Wall Street Journal reported that Ways & Means and Finance “are still discussing many other tax options, including the size of an increase in the corporate tax rate” but “were aligned on raising the top income tax rate to 39.6% from 37%, instituting new limits on tax-preferred retirement accounts totaling $10 million or more, and a retroactive cap on deductions for conservation easements, which are charitable donations of land rights.” Chairman Wyden is pushing for a “billionaire’s income tax” on annual increases in wealth, the report said. That could reflect dissatisfaction by some Democratic senators with the Ways & Means proposal for a 3% surcharge on incomes over $5 million, seen as perhaps not going far enough to tax the very wealthy. “I’m going to push very hard for it. Yeah, I’m chairman of the committee, I’m going to push hard,” Wyden said.
The report said “the tentative agreement on the IRS provision would require banks to report total annual inflows and outflows from bank accounts with at least $10,000 worth of gross flows. That is a higher threshold than the $600 the Biden administration initially proposed, though still one that would give the IRS two more annual data points on many people who have their paychecks deposited.”
An EY Financial Services Office Alert on the Ways & Means bill’s implications for insurance companies is available here.
Health – Roll Call reported Chairman Neal as saying of the reconciliation bill that “the exact prescription drug pricing negotiation language was still under discussion. It could be as broad as a House-passed bill from the last Congress that would make hundreds of prescription drugs subject to price negotiation for Medicare and the private market, which the Congressional Budget Office estimated would reduce deficits by roughly $500 billion, or a narrower version that would save less money. ‘That’s a little bit more difficult at the moment, but we're still talking about it,’ Neal said.” Rep. Scott Peters (D-CA), one of three Energy & Commerce members who opposed the panel’s subtitle on the issue and co-authored the narrower approach, “said Thursday that Democratic leaders have not talked to him about drug pricing since the markup.”
The Hill reported Sen. Manchin as “firing a warning shot at progressives’ hopes of using a sweeping social spending bill to expand Medicare,” arguing the focus should be stabilization. “I’ll say this about Medicare: We need to stabilize it. By 2026, you understand the trust fund is going to be insolvent. ...I want to make sure we are stabilizing what we have before we start going down this expansion role,” Manchin said.
Infrastructure – Asked whether the tax revenue agreement will break the stalemate with progressives on the House infrastructure vote and allow that to proceed early next week – it is targeted for September 27 or 28 – Speaker Pelosi said during her news conference: “We take it one day at a time but I’m confident that we will pass both bills.” The House Budget Committee will assemble House committees’ portions of the reconciliation bill – seen as a formality because changes to committee recommendations can’t be made by the Budget Committee – on Saturday. Scheduling that step and announcing that tax committee chairmen are settling on a menu of options for revenue are seen by some as seeking to demonstrate to progressives that sufficient progress is being made ahead of an infrastructure vote.
Government funding, debt limit – Speaker Pelosi downplayed the threat of a government shutdown after September 30. “We’ll keep government open. We’ll have the votes to do that, and then we’ll go to the Senate again. But the full faith and credit is a national debate. It’s a national debate, and why should it be that we, as Democrats, always come to the rescue when it’s a Republican president?” Senate Republicans won’t support the House-passed continuing resolution (CR) to extend government funding to December 3 because it also includes a debt limit suspension until December 16, 2022, which they oppose on the grounds that Democrats are largely moving their agenda on a one-party basis under reconciliation. Democrats could act on the issue on a party-line basis under the reconciliation process, as the Speaker seemed to allude to, but it would require reopening the budget resolution and two Senate vote-a-ramas, which some Democrats signaled could take too long given the must-act date in October.
Senate Republican leader Mitch McConnell (R-KY) September 23 disagreed with that assessment and laid out the steps the other party could take in short order. “Senate Democrats know what they need to do. They will need to write a short resolution amending their previous budget resolution with new debt limit instructions. They’ll take that to the Budget Committee...” he said. “Then a vote to proceed on the floor, a limited ‘vote-a-rama,’ and a vote on final passage. And then, once the budget has been amended, House and Senate Democrats would use the same fast-track process on a short and simple bill to actually raise the debt limit. This won’t be a multi-week process.”
Today, September 24 (12:00 p.m.), is the EY Webcast, “Tax in the time of COVID-19: update on legislative, economic, regulatory and IRS developments.” Register