Tax News Update    Email this document    Print this document  

October 22, 2021

What to expect in Washington (October 22)

Senator Kyrsten Sinema’s (D-AZ) continued comments that she won’t support tax rate increases in a budget reconciliation bill are creating doubts that increases in the corporate, individual, and capital gains rates, which under the House bill raise nearly $840 billion (over 10 years), can be included in their entirety. The focus now is on international tax changes, tax gap proposals, and other potential non-tax rate changes like a 15% minimum tax based on book income, an excise tax on stock buybacks, and mark-to-market annual taxation on billionaires’ capital gains. Multiple news outlets reported late October 21 that Senator Sinema has signed on to enough non-tax rate increase revenue measures to pay for the reconciliation bill, in each of the areas of corporate, international, high-income individual, and tax enforcement, without mentioning specifics, including the cost of the bill.

President Biden said during a CNN Town Hall in Baltimore October 21 that he doesn’t think the reconciliation bill will include an increase in the corporate tax rate because of Senator Sinema’s opposition. “She says she will not raise a single penny in taxes on the corporate side and/or on wealthy people, period,” the President said. He also suggested, on expanding Medicare to dental, hearing, and vision coverage, maybe “getting an $800 voucher from Medicare for dental work,” and that, because of opposition from Senator Joe Manchin (D-WV) and at least one other member, a free community college proposal won’t be included. The President said a reconciliation deal among Democrats is now “down to four or five issues.”

Senate Democratic leaders had been hoping to reach an agreement today. Senator Manchin told reporters October 21 that it is “pretty hard to make final decisions” in the absence of more legislative details, the Washington Post reported. Asked if it could take longer than Friday to broker a compromise, he eventually replied: “This is not going to happen any time soon.” Still, President Biden said last night, “I do think I’ll get a deal.” The pressure is on doing so by the end of next week as Democrats near a self-imposed October 31 deadline, the President heads to Europe, and the November 2 gubernatorial election in Virginia approaches.

Tax – The New York Times October 20 reported that the latest vision for the revenue element of the reconciliation bill is built around issues like addressing the tax gap “and increased taxes on the income that multinational companies operating in the United States earn overseas, which many Democrats calculate could raise at least $1 trillion over a decade, combined. Democrats are also exploring a tax on billionaires’ wealth and on corporate stock buybacks, which Senate Democrats have championed, along with a new minimum tax on corporations.”

The Wall Street Journal reported Ways & Means Chairman Richard Neal (D-MA) as saying, “The rates that we came up with were not punitive, and they allow us to accomplish policy outcomes that many of us agree on.” Neal, Senate Finance Committee Chairman Ron Wyden (D-OR), House Speaker Nancy Pelosi (D-CA), Senate Majority Leader Chuck Schumer (D-NY) and White House officials discussed revenue measures on Wednesday, October 20.

Chairman Neal subsequently said he told Sinema that, at this point in the process, asking for new proposals like mark-to-market taxation is difficult, Punchbowl reported. “It’s the ninth inning,” Neal said. “When are you gonna vet these issues? … I still think there’s a long ways to go.” Bloomberg reported that Chairman Neal discussed with Senator Sinema tax rate increase proposals and strengthening international rules to tax more of the profits U.S. companies earn abroad. On tax spending, “She’s in on renewables. She’s in on the issue of the child credit. She’s in on family medical leave, and that’s the way she ranked them,” Neal said. “She said, ‘I agree with you – this has gotta pass.’”

Politico reported that, though Manchin “has advocated raising rates on high-income earners, corporations and capital gains, Sinema has landed to the right of Manchin on tax policy. And Democrats need to choose, quickly, to keep trying to convince Sinema or to craft workarounds that she can accept. ‘That’s not worked out in our caucus,’ said Sen. Ben Cardin (D-Md.). ‘There is strong support in our caucus to raise the corporate rate. And it depends how you do it for high earners … I don’t think she’s opposed to some of the issues for high-income [taxpayers].’”

As a review of some non-rate increase proposals:

  • 15% minimum tax based on book income – proposed in the Biden FY2022 budget to raise $148 billion over 10 years but not included in the House Ways & Means Committee bill
  • Wyden’s “billionaire’s tax” hasn’t been formally proposed but is understood to generally impose mark-to-market annual taxation on gains for those above that income threshold
  • Wyden and Senator Sherrod Brown (D-OH)-sponsored Stock Buyback Accountability Act (S. 2758) to assess a 2% excise tax on money spent by a publicly-traded company to buy back its own stock.

DSTs – The Treasury Department October 21 announced that Austria, France, Italy, Spain and the United Kingdom have agreed that, as part of Pillar 1 of the OECD global tax agreement, they will withdraw all Unilateral Measures on all companies, including digital services taxes (DSTs). While the US wanted such taxes to be withdrawn as of October 8 (the date of the tax agreement), the other nations preferred withdrawal to be contingent on implementation of Pillar 1.

Under a compromise, to the extent that taxes that accrue to the nations before Pillar 1 takes effect exceed the first-year tax due under Pillar 1, the excess will be creditable against the portion of the corporate income tax liability as computed under Pillar 1 in these countries. As USTR noted in a separate release, “In return, the United States will terminate the currently-suspended additional duties on goods of Austria, France, Italy, Spain, and the United Kingdom that had been adopted in the DST Section 301 investigations. USTR is proceeding with the formal steps required for terminating the Section 301 trade actions, and in coordination with Treasury, will monitor implementation of the agreement going forward.”   

WCEY’s DC Dynamics podcast focuses on US tax policy. Host Ray Beeman breaks down and examines current developments in Congress and puts them into political and policy context.

Today, 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 (