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November 3, 2021

What to expect in Washington (November 3)

House Democratic leaders' plan for a vote on the budget reconciliation bill this week is less certain after Senator Joe Manchin (D-WV) said November 1 he wants more time to determine how the bill will impact the federal debt and a group of House centrists followed with calls for estimates from the Joint Committee on Taxation and Congressional Budget Office and posting of final text of the bill at least 72 hours before a vote. CNN reported Manchin as saying November 2, a day after calling for a new pause in the process, "I just think it's going to take quite a while. You're talking about overhauling the entire tax code. That is tremendous. And there needs to be input … And we're not in a rush right now. The rush was trying to get everything" before President Biden left for Europe last week. He also said a House infrastructure bill vote shouldn't wait.

There are several reconciliation provisions still being negotiated and Manchin said he had concerns about immigration, taxes, climate, and Medicare. On taxes, Manchin said he wants to "make sure that we don't try to unintentionally force people into inversions again so people leave our country or (force) companies to be domiciled elsewhere." Senator Manchin expressed optimism that resolving outstanding issues would lead to a deal and perhaps allow for Senate consideration the week of November 15, as Leader Chuck Schumer (D-NY) has targeted. "We have all next week. We're going to work into it next week … " Manchin said. "So if everyone works real hard, I've said, we can get it done before Thanksgiving. We're going to get something done."

Manchin suggested on November 1 he has concerns with the structure of some of the tax credit provisions, like the extension of the expanded Child Tax Credit, that were clipped to reduce the cost. "[W]hat I see are shell games, budget gimmicks that make the real cost of the so-called $1.75 trillion bill estimated to be almost twice that amount, if the full time is run out, if you extended it permanently, and that, we haven't even spoken about," he said. The Wall Street Journal reported "his comments about funding programs on a short-term basis could prove problematic for Democrats. As part of an effort to reduce the price tag of the legislation, Democrats cut back the duration of many programs to keep them in the bill, hoping to extend them in future legislation. In particular, the expanded child tax credit is only slated to last one year."

House moderates share his concerns and that factors into the vote count. Five centrist Democrats including Ways & Means member Stephanie Murphy (D-FL) — enough to sink the reconciliation bill if they withhold support — said in a November 2 letter that "we must first have the proper CBO/JCT scoring information," there should be a "strong level of confidence that the provisions in the bill will be ruled in order by the Senate Parliamentarian and earn passage in the U.S. Senate," and final text must be posted 72 hours ahead of time. The demands were seen as dampening hopes for a vote this week.

Rep. Pramila Jayapal (D-WA), the main voice for progressive Democrats in the House who held up a vote on the bipartisan infrastructure framework (BIF) last week, said November 2 that even with issues still being negotiated, such as childcare, immigration, and prescription drug pricing, she is still hopeful for a vote on both the BIF and reconciliation bill in the House this week. "The hope is to go to Rules tomorrow, and then hopefully vote right after that," Jayapal said on Tuesday, Politico reported. "We're gonna vote both bills out this week." She suggested that progressives are now comfortable going forward because there is bill text and a commitment from President Biden to deliver votes. "We will accept the President's word that he is going to get 51 votes in the Senate and that's what we're going to get," she said.

SALT - The state & local tax deduction cap is one issue still under discussion. Politico reported that under an approach targeted by Democrats, including Senator Schumer, "the $10,000 SALT limits would be repealed from 2021 through 2025 … The cap would then be added back for five years, which would serve to offset the costs of rolling back the cap." Senator Bernie Sanders (I-VT) took issue with that approach as representing a tax cut for those with high incomes, but subsequently said he is open to a possible SALT compromise to lift the cap for people with incomes under about $400,000 a year. Members from high-tax states continue to insist that including SALT cap relief in the bill is imperative.

New this morning, the Washington Post said "senior Democratic have eyed pairing the repeal of the SALT cap with an expanded 'alternative minimum tax,' which was effectively gutted by the 2017 GOP tax law."

Punchbowl News reported that word of the emerging approach to SALT cap relief was presenting a new concern in the negotiations. "It's a way more generous proposal than anyone thought was gonna be in there so it's gonna be a problem now," Rep. Jayapal said. "I'm already getting calls from our members because people are seeing how much is spent on SALT versus all the other things."

"We're still struggling over the SALT cap as you know but for the most part, I think that we're close to settling on a package that will be just a little shy of $2 trillion," Ways & Means Chairman Richard Neal (D-MA) said at a SIFMA event, Bloomberg reported. Roll Call reported Neal as quipping. "I have earned a Ph.D. here in the SALT deduction … Because it's been argued from every perspective I can think of."

Health - On November 2, Democratic leaders announced a bicameral agreement on drug pricing provisions aimed for inclusion in the Build Back Better Act. With the drug pricing compromise in place, Speaker Pelosi said the spending bill is "just about finished," and intends to get the bill on the floor for a vote later this week, along with the infrastructure bill that has been passed out of the Senate. Senator Kyrsten Sinema (D-AZ) said she supports the pricing plan, which has three main provisions:

  • allow Medicare to negotiate 10 of the highest spending single source drugs outside their initial exclusivity periods, as well as insulin products
  • redesign the Part D benefit to protect seniors from high out-of-pocket spending
  • institute rebates for drug prices that grow faster than inflation

Congress — On November 2, the Senate confirmed by an 88-10 vote Jonathan Davidson to be Deputy Under Secretary of the Treasury, with an expected role in legislative affairs. Previously, Davidson worked for Senators Michael Bennet (D-CO), Mark Warner (D-VA), and Paul Sarbanes (D-MD).

Global tax — An EY Alert, "G20 leaders confirm commitment to global tax changes under BEPS 2.0," is available here.

Friday, November 5 (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
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