Tax News Update    Email this document    Print this document  

October 13, 2021

What to expect in Washington (October 13)

The House reconvened yesterday to clear (219-206) the Senate-passed debt limit increase that will allow Treasury to meet the nation’s financial obligations into December, in the range of when government funding expires December 3. Congress is mostly out of session this week, though the back-and-forth over how to shrink the $3.5 trillion-plus House reconciliation bill to win the support of moderate Senators Joe Manchin (D-WV) and Kyrsten Sinema (D-AZ) continues. The widely cited target is $2 trillion, and options are narrowing the scope of the bill or retaining the broad scope of policies but reducing the duration or benefits of provisions to lower the cost.

House Speaker Nancy Pelosi (D-CA) told members in an October 11 letter, “Overwhelmingly, the guidance I am receiving from Members is to do fewer things well so that we can still have a transformative impact on families in the workplace and responsibly address the climate crisis: a Build Back Better agenda for jobs and the planet For The Children!” However, in a news conference October 12, the Speaker said reducing the cost of the package could involve “cutting back on years,” said she hoped they wouldn’t have to drop parts of the plan and wouldn’t speculate on what those parts would be if they did. She later said both approaches are a possibility. “We have some important decisions to make in the next few days so that we can proceed,” the Speaker said.

Some moderates favor narrowing the scope of the package, while progressives continue to push for a broad bill. Rep. Pramila Jayapal (D-WA), who previously called for a minimum of $2.5 trillion, tweeted October 12: “There is simply NO scenario where we finally make long-overdue investments in working people — in popular things like childcare, health care, paid leave, education, housing, climate action — and then look back years later and say we did too much or went too big. Let’s deliver.” Asked on CBS about how progressive priorities will be paid for in a slimmed down bill: “We do believe that you can significantly cut down on the price tag by funding some of these programs for a shorter period of time,” Jayapal said.

Punchbowl reported that House Budget Committee Chair John Yarmuth (D-KY) has “already suggested not including expanding Medicare programs for dental, hearing and vision, arguing they’re very costly. Yarmuth and other Democrats also point out that the dental program wouldn’t phase in until 2028, and it has inspired big opposition from the American Dental Association and other dentist groups. Yarmuth has argued to put the dental program in a reconciliation package next year.” The Washington Post reported that Senator Sanders defended his proposal to expand Medicare to include dental, vision and hearing benefits amid growing concerns that it may be on the chopping block. “This, to me, is not negotiable,” he said.

Separately, Chairman Yarmuth announced yesterday he won’t seek re-election in 2022. His son is weighing a bid to replace him. The AP reported the “congressman is the 10th Democrat to announce plans to retire ahead of the 2022 election” and “the district he represents has become increasingly blue.” Yarmuth said he’s in excellent health but acknowledged that the “significant physical demands” of the job will become even more challenging.

The Wall Street Journal reported on means testing to limit eligibility for some programs to low-income Americans. Senator Manchin has advocated that approach and Senator Mark Warner (D-VA) has said members are looking at limiting eligibility for the expanded Child Tax Credit because some Senators are receiving checks. The story said, “On the other side are both progressive and centrist Democrats who want to make programs like subsidized child care, free preschool and two years of free community college available to Americans up and down the income ladder” and “Mrs. Pelosi hasn’t indicated where she stands on income eligibility.”

Putting the tensions in political context, the New York Times October 11 cited former Obama administration official Jason Furman as saying “The problem now is this may be the last train leaving the station for a long time… five, 10, 20 years before there’s another shot at a lot of these issues,” and John Podesta as viewing the package as “a chance to avoid those losses by giving Democratic incumbents a batch of popular programs to run on, and also giving the president policy victories that could define his legacy.”

The Washington Post reported over the weekend that “Senate Majority Leader Charles E. Schumer (D-N.Y.) is pressuring fellow Democrats to agree on a framework for the safety net package in a matter of days, so it and the infrastructure bill can be passed by the end of this month,” though “some liberals are signaling they do not necessarily feel bound by party leaders’ rapid timetable.” The story noted that progressives “have floated the idea of funding some new programs only for a set number of years” and hope “that the programs will prove so popular that Congress would be forced to extend them later. But some centrist lawmakers are balking at that accounting strategy.”

Saturday’s NYT reported that Senator Sinema “wants to cut at least $100 billion from climate programs” in the reconciliation bill to lower the cost. “As Democrats try to slice $1.5 trillion from the overall bill, party leaders have vowed to protect at least two major climate change programs,” which are the $150 billion proposal Clean Electricity Program to reward electric utilities that switch from fossil fuels to renewable sources, and “roughly $300 billion in tax incentives to increase the use of wind and solar power and electric vehicles.”

Global tax – After Treasury Secretary Janet Yellen said over the weekend said she is “confident that what we need to do to come into compliance with the minimum tax will be included in a reconciliation package,” Politico cited a Treasury official as suggesting that would consist of increasing the current GILTI rate to 15% and applying it on a country-by-country basis. It is the minimum tax part of the deal under Pillar 2 that requires changing GILTI, as Democrats plan to do in the reconciliation bill; reallocating a portion of large MNEs’ profits to market jurisdictions under Pillar 1 will likely require ratification of a multilateral tax treaty by the Senate, with a two-thirds vote threshold.


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