October 8, 2021
What to expect in Washington (October 8)
The Senate October 7 cleared a $480 billion increase in the federal debt limit to allow Treasury to meet the nation's obligations into at least early December, setting up another must-act date on the issue within the range of the expiration of government funding on December 3. (Some tax cliffs and extenders follow soon behind on December 31.) The vote was 50-48, preceded by a 61-38 cloture vote for which Republican support to achieve the 60-vote threshold was in question. The House is set to consider the Senate-passed measure on Tuesday, October 12. "The pathway our Democratic colleagues have accepted will spare the American people any near term crisis while definitely resolving the majority's excuse that they lacked time to address the debt limit through the … reconciliation process," Senate Republican leader Mitch McConnell (R-KY) said.
Republicans voting in favor of the procedural vote to break the filibuster: Senators Barrasso, Blunt, Capito, Collins, Cornyn, McConnell, Murkowski, Portman, Rounds, Shelby, and Thune.
On the specifics, Roll Call reported:
Republicans expect Democrats to need the reconciliation process to ultimately address the debt limit on a long-term basis. That process could also force them to raise the limit to a certain amount, rather than suspend it through a certain date. Senate Democrats have not yet embraced that approach, but if they did it would not impact the budget reconciliation bill teed up by 13 House committees and awaiting a House-Senate agreement over a topline spending number. On that issue, Senator Joe Manchin (D-WV) this week reiterated his insistence on a $1.5 trillion ceiling, and he met with the President again yesterday. Progressives led by Rep. Pramila Jayapal (D-WA) say they will support a minimum size of $2.5 trillion. The only deadline between now and December will be the expiration of the highway authorization October 31, which Democrats set as a self-imposed deadline for a reconciliation agreement and House vote on the bipartisan infrastructure framework (BIF).
Moderate Senators Manchin and Kyrsten Sinema (D-AZ) — who has not publicly divulged her view on a topline spending number — are seen as holding the keys to the reconciliation bill given the 50-50 Senate split. Progressives have increasingly expressed frustration over that dynamic. Senate Budget Committee Chairman Bernie Sanders (I-VT) yesterday tweeted, "When you've got the support of the majority of the American people, the Democratic House and Senate caucus, and when you've got the support of the president — this is not some 50-50 deal. Two people cannot stand in the way of delivering for the working people of this country." He also told reporters that Senator Sinema's position that she does not negotiate publicly leaves other members uncertain where she's coming from. "Tell us what you want," Sanders said.
A major question is whether a smaller topline number means a scope of provisions that is narrower than in the House bill, or the same roster of proposals with shorter duration and limited benefits. Axios reported October 6 that Senator Manchin told other members that progressives need to pick just one of Biden's three policies for helping working families and discard the other two; i.e., choose between the expanded child tax credit, paid family medical leave, and subsidies for childcare. "He's also aligning himself with Democratic centrists in the House, who want to trim the number of programs in any final package but fund them for longer," the report said. "Progressives are hopeful they can retain all of their cherished programs in a final bill by funding many of them for shorter durations and therefore lower the bill's ultimate price tag."
Official estimates for some of the proposals in the House bill haven't been provided and may not be for a while. In a letter to Senator McConnell, the Congressional Budget Office (CBO) said it has not completed estimates for the budget reconciliation recommendations of committees beyond four — Veterans' Affairs, Homeland Security, Oversight, and Small Business — or an estimate of the entire House legislative package, and it is unclear when they will. "The legislation being considered by the House is complex, and provisions in some committees' recommendations interact with those of other committees," CBO said. "Moreover, the agency has had to devote substantial resources to providing technical assistance as committees continue to modify their proposals."
Global tax — Ahead of the Inclusive Framework on BEPS meeting today, Ireland and Estonia announced yesterday they were joining the global tax agreement. Previous reporting had suggested Ireland could be satisfied if the agreement called for a minimum tax of 15% but not more (i.e., not "at least" that amount). The New York Times reported, "Negotiators were on the brink of agreeing to the rate on Thursday, ahead of a Friday meeting" at OECD. "The framework under consideration includes a global minimum tax of 15 percent that each country would adopt, and new rules that would force technology giants … and other big global businesses to pay taxes in countries where their goods or services are sold, even if they have no physical presence there."
Wall Street Journal: "The broad political agreement expected Friday is an important step forward but not the final move. Implementation will be a challenging dance, as the U.S. watches to see whether European countries will remove digital taxes as promised and the rest of the world sees whether the U.S. Congress can update its existing minimum tax and then adopt subsequent changes to the international rules about where income is taxed. And crucial details remain to be decided. Among them: how to prevent countries from circumventing the strictures against low-tax regimes by offering nontax subsidies to companies."
Washington Council EY's latest "DC Dynamics" podcast includes discussion of the Build Back Better plan, reconciliation, and what lies ahead on health care.
Today, October 8 (12:00 p.m.), is the EY Webcast, "Tax in the time of COVID-19: update on legislative, economic, regulatory and IRS developments." Register
Note: What to Expect in Washington will not be published on Monday, October 11.