Tax News Update    Email this document    Print this document  

October 20, 2021

What to expect in Washington (October 20)

Senator Joe Manchin (D-WV) said October 19 that he and Senator Bernie Sanders (I-VT) are working with Senate Majority Leader Chuck Schumer (D-NY) to reach a budget reconciliation deal by Friday, The Hill reported. “I think there’s a strong feeling within the caucus that we either fish or cut bait to get this thing done or we don’t get it done but that it does not continue to drag on forever,” Senator Sanders said. Manchin’s announcement on efforts to reach a deal between two polarized members on the reconciliation bill and after negative comments between them came during the regular Tuesday Senate Democratic party lunch, following which Leader Schumer said there was “universal agreement in that room that we have to come to an agreement, and [we’ve] got to get it down and want to get it down this week.”

Senator Mazie Hirono (D-HI), who previously eschewed self-imposed deadlines set by Democrats, said according to Roll Call, “I don’t know if it’s going to be this week or next week… My hope is that it’ll be within the next two weeks [that] we’ll come up with a framework that’s going to be much more specific than what I’ve heard so far.”

President Biden met separately on Tuesday with Senator Kyrsten Sinema (D-AZ), House progressives, and House & Senate moderates, and said reconciliation plans for free community college would be dropped, the expanded Child Tax Credit would be extended for only one additional year and means tested, homecare funding would be reduced from what was proposed, and paid leave benefits could be reduced to four weeks from 12, CNN reported. There has long been a tension between dropping some items altogether, as moderates advocated, and clipping their duration, the approach favored by progressives.

In one sign of House-Senate tension on another issue, Senator Manchin has indicated he wants to cut the paid leave program in the House bill, but Axios reported Ways & Means Chairman Richard Neal (D-MA) as saying, “Paid family and medical leave must be in the final package.” The proposal is a signature piece of the Ways & Means package and has the strong backing of Speaker Nancy Pelosi (D-CA).

The Washington Post reported that President Biden suggested to the group of progressives that he feels a deal of between $1.75 trillion and $1.9 trillion could be secured, and that the current vision for the plan “includes at least some expansion of Medicare to offer new benefits to seniors, the introduction of universal prekindergarten, and billions of dollars to address climate change.”

Nailing down a topline spending number and an approach to cutting spending under the House bill will ultimately give lawmakers an indication of how much revenue needs to be raised – the Ways & Means bill proposed about $2.1 trillion in tax increases and Democrats are expecting to count revenue from drug pricing negotiation – and allow for decisions on what tax proposals will be included. “The overall bill was still expected to address climate change, provide some federal coverage for prekindergarten and home care, and increase taxes on the wealthy and corporations,” the New York Times (NYT) reported.

Politico reported that President Biden told moderates he does not want to leave for the G20 summit at the end of next week – it’s being held in Rome October 30-31 – without reaching agreements with Congress. There is also the climate change summit in Glasgow beginning October 31. House Democrats have set October 31 for a reconciliation deal that could draw sufficient support for a House vote on the Senate-passed infrastructure bill, and there is pressure for some Democratic progress in Washington ahead of the November 2 gubernatorial election in Virginia.

Health - Both Affordable Care Act subsidies and a Medicaid expansion are in the bill as envisioned, but for shorter periods than some Democrats have sought, Politico reported, adding that Biden discussed three years of ACA subsidies. On expanding Medicare to dental, hearing, and vision coverage, several news outlets discussed a potential pilot program for dental coverage.

Tax – Politico also reported that President Biden told moderates that relief from the $10,000 state and local tax (SALT) deduction cap is not in the plan as currently envisioned.

Climate – Senator Manchin, who has made his opposition to the $150 billion Clean Electricity Performance Program in the House bill known, said in the NYT report of the approach to combatting climate change, “We’re going with tax incentives — we’re going to incentivize people basically to move forward on technology that we have.” He also said October 19 that a carbon tax is not under consideration.

There is now the recognition from some of the strongest proponents of action on the climate issue that it may not all happen in the context of the budget reconciliation bill. The Post reported October 19, “Now, White House officials and some of their key allies in the Senate are arguing that the United States can still meet its commitment under the Paris agreement to cut the nation’s carbon output in half by the end of the decade, compared to 2005 levels, through a combination of other executive and legislative action. ‘We’re just going to have to work hard on a continuing basis to achieve that goal in this package and what the administration can do,’ said Sen. Edward J. Markey (D-Mass.).”

Tax gap reporting – Though not in the House bill, an IRS tax gap information reporting proposal for financial accounts with more than $10,000 in annual deposits or withdrawals was rolled out by Treasury in coordination with Senate Democrats October 19 and could be part of a final reconciliation deal. Chairman Neal, who said during the Ways & Means reconciliation markup that he was working with Treasury on the issue, stopped short of a full endorsement October 19, saying “the $10,000 figure is manageable” but that he wants to see more details, Bloomberg reported.

A Treasury fact sheet said, “Under the current proposal, financial accounts with money flowing in and out that totals less than $10,000 annually are not subject to any additional reporting. Further, when computing this threshold, the new, tailored proposal carves out wage and salary earners and federal program beneficiaries, such that only those accruing other forms of income in opaque ways are a part of the reporting regime.”

The Administration has long been pushing for a tax gap proposal and Democrats have softened it with the $10,000 threshold, up from $600, but it is still a target of Republicans who say it poses privacy concerns. House Republican leader Kevin McCarthy (R-CA) tweeted October 19, “RT if you agree ? The IRS should not be surveilling your bank accounts.”

On Friday, October 22 (12:00 p.m. ET), 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 (
   • Kurt Ritterpusch (
   • Heather Meade (
   • Adam Francis (