Just before 4 a.m. the morning of Wednesday, August 11, after a marathon 15-hour voting session, the Senate approved the FY2022 budget resolution with reconciliation instructions (S. Con. Res. 14) by a vote of 50-49, clearing the way for the drafting of a $3.5 trillion package of Democratic priorities that can pass with a simple majority vote in the Senate. The resolution sets revenue and spending targets for a budget reconciliation bill but does not prescribe policy details, which will be worked out by various Senate and House Committees within the confines of their reconciliation instruction targets (see below) this fall. Senate Majority Leader Chuck Schumer (D-NY) said, "The Budget Resolution provides a target date of September 15th to the committees to submit their reconciliation legislation. We will work towards this goal and meet, as a caucus, during the week of the 15th to review the bill."

A leadership notice sent to House members on Tuesday evening said the House would interrupt its August recess to convene on Monday, August 23, to consider the Senate-passed budget resolution as well as HR 4, the Voting Rights Act, and "will remain in session until our business for the week is concluded."

After the final passage vote, Schumer said, "Teddy Roosevelt said nothing in the world is worth doing unless it means effort, pain, and difficulty. What we're doing here is not easy. Democrats have labored for months to reach this point, and there are many labors to come, but I can say with absolute certainty that it will be worth doing. The Democratic budget will bring a generational transformation to how our economy works for average Americans … It will be paid for by making our tax code more progressive and more fair, asking corporations and the wealthy to pay their fair share."

Tax amendments of note that were considered during the voting session included:

• Senator John Thune's (R-SD) stepped-up basis amendment calling on Congress to protect owners of generationally-owned businesses, farms, and ranches so that they may continue to transfer ownership or operations to family members or others based upon the same tax principles that existed when they began operations (#3106), was adopted 99-0. Senator Thune said a competing amendment by Senator Catherine Cortez Masto (D-NV) on exemptions for stepped-up basis wouldn't provide sustained relief and would be difficult to implement. The Cortez Masto amendment, to establish a reserve fund relating to protecting family farms, ranches, and small businesses while ensuring the wealthy pay their fair share (#3317), was not adopted, 49-50.
• An amendment by Senators Maggie Hassan (D-NH) and Todd Young (R-IN) (#3278) relating to promoting U.S. competitiveness and innovation by supporting research and development, including by preserving full expensing of R&D expenditures and expanding the R&D credit for small businesses, was adopted by voice vote.
• Senate Finance Committee Ranking Member Mike Crapo's (R-ID) amendment calling for preventing the monitoring and reporting of American taxpayer information to the IRS by financial institutions about deposits and withdrawals made by an individual or business in savings, checking, or other accounts of as little as $600 (#3099) was not adopted, 49-50. Finance Committee Chairman Ron Wyden's (D-OR) amendment (#3365) relating to "protecting the privacy of American taxpayer and small business tax information while only reporting large financial account balances to the Internal Revenue Service, to ensure those evading the tax system pay what they owe" was adopted 50-49.
• Senator Young's amendment to prevent breaking the President's promise to not increase taxes on those with income below $400,000 annually (#3444) was adopted 98-1.
• Senator Mitt Romney's (R-UT) amendment (#3652) to prevent the budget from including "trillions of dollars in job-killing tax hikes" was not adopted, 49-50. Romney said the amendment "eliminates the instructions to the Senate Finance Committee whereupon people would be able to have their taxes increased. If you want to have taxes go up in this country on corporations and people, you should vote against my amendment."
• Senator Mike Lee's (R-UT) amendment #3141, to establish a deficit-neutral reserve fund relating to studying and providing for tax equivalency under the Payments In Lieu of Taxes program, was adopted, 51-48. Lee said that 21 years ago, "The USDA concluded that PILT payments needed to be increased by 3 ½ times. On certain federal lands, the number is much larger … My amendment … would direct the Secretary of the Interior to conduct a study on the true taxable value of PILT land and treat it as if it were owned by anyone else other than the federal government and, therefore, subject to taxation." In opposition, Senator Joe Manchin (D-WV) said, "The administration has testified that trying to incorporate a system into the PILT formula that involves appraising every parcel of federal land and tracking every local tax rate would prove nearly impossible to administer."
• Sen. Steve Daines' (R-MT) amendment #3292, to prohibit tax hikes on small businesses, was adopted by voice vote. "Some members on the other side of the aisle have put forth some very misguided efforts to raise taxes on … small businesses, attempting to redefine what constitutes a small business," Daines said. "Thankfully we already have an agreed-upon definition that was set by the Small Business Administration, which defines a small business as one with fewer than 500 employees. Efforts such as to end the small-business tax deduction passed in the Tax Cuts and Jobs Act based on arbitrary income thresholds should be called out for what they are: These are small-business tax hikes." Finance Chairman Wyden said, "Our core belief is that taxes should not be raised on small businesses and that the wealthiest and the biggest corporations should pay their fair share. This amendment is consistent with that. I'm going to support it."
• Senator John Kennedy's (R-LA) amendment #3753, to prohibit any changes to the tax treatment of like-kind exchanges, was adopted by voice vote. Kennedy did not offer remarks further describing the amendment, and Finance Chairman Wyden said, "It's my understanding that after 15 hours or so, this is the last amendment of the night, and I recommend we do it by voice vote."

Health care amendments of note included:

• An amendment by Senator James Lankford (R-OK) (#3792) to add language prohibiting the use of federal funds to pay for abortion, consistent with the Hyde amendment, was adopted 50-49. Senator Joe Manchin (R-WV) joined all Republicans in voting yes.
• Senator Kennedy's amendment #3758, to establish a deficit-neutral reserve fund establishing penalties for providers performing elective abortions when the post-fertilization age of the unborn child is 20 weeks or greater, was not adopted, 48-51. Kennedy said the amendment would not apply to abortions in the case of rape, incest or when the life of the mother is in danger. Senator Patty Murray (D-WA) said in opposition, "Let's be perfectly clear about this amendment. It is a clear attempt to undermine Roe v. Wade. It would impose a 20-week abortion ban with no exceptions for rape or incest, and it would harm women and countries across the country."
• Senator James Inhofe's (R-OK) amendment #3331, to establish a deficit-neutral reserve fund that may include prohibiting funding for abortions of unborn children with Down syndrome or other chromosomal conditions, was not adopted, 49-50. Inhofe said, "Over two-thirds of the unborn babies diagnosed with Down syndrome in the United States are aborted. Some countries like Iceland are eradicating their entire population of individuals with Down syndrome through abortion." In opposition, Senator Richard Blumenthal (D-CT) called the amendment "a pretext for restricting reproductive rights and interfering with women's decisions about whether to have an abortion."
• Senator Roger Marshall's (R-KS) amendment #3797 establishing a deficit-neutral reserve fund relating to protecting migrants and local communities against COVID-19 was adopted, 88-11. Marshall said, "Some estimates would suggest hundreds or perhaps even thousands of COVID-positive illegal immigrants in our republic every day. That means we have a super-spreader event at our southern border every single day … My amendment would ensure resources are provided for testing and treatment of migrants at the border and for quarantining those who test positive for COVID as well and the transportation of migrants who have not received a negative test." Senator Richard Durbin (D-IL) said in opposition, "If there is a mother who is in labor and needs to go the hospital immediately, under your language they cannot be transported unless they have a negative COVID-19 test. That is not good medicine. That is not humane."

The reconciliation instruction targets by committee are as follows:

A Democratic memo on reconciliation circulated in conjunction with the resolution said offsets envisioned to be developed by the Senate Finance Committee should address corporate and international tax reform; tax fairness for high-income individuals; IRS tax enforcement; health care savings; and a Carbon Polluter Import Fee. The reconciliation instructions envision from the Finance Committee $1.8 trillion in investments for working families, senior citizens and the environment, which would require, to meet the $1 billion instruction target, revenue-increasing or spending cut proposals within the Committee's jurisdiction of at least $1.81 trillion. Not all revenue for the reconciliation bill will come from tax increases; some will come from health provisions and, potentially, macroeconomic growth. It is also possible, however, that the committee could develop policies that cost less than the $1.8 trillion target, and thus require less in new revenues or spending cuts.

"In order to give the Senate Finance Committee the flexibility it needs to accomplish these goals, the text of the Budget Resolution will provide the Finance Committee with an instruction to reduce the deficit by a nominal amount of $1 billion over ten years," the memo stated. "There is ample precedent over the past fifteen years for using a nominal reconciliation instruction as a mechanism to allow a committee to bring forth legislation with larger budgetary implications than such an instruction suggests."

Chairman Wyden released a statement saying in part, "the Finance Committee has been working on a menu of options for the caucus to consider. Our proposals will fall into four categories: multi-national corporations, the wealthiest individuals, enforcement against wealthy tax cheats and savings from other programs. Many of these proposals have been laid out — the Wyden-Brown-Warner international tax framework to ensure mega-corporations pay their fair share, legislation to expand the pass through deduction while dedicating it to Main Street small businesses, legislation to close the carried interest loophole for private equity moguls and legislation to ensure wealthy investors pay tax on investments underlying derivatives contracts, just to name a few."

Health Care

In a Dear Colleague letter, Majority Leader Schumer said "At its core, this legislation is about restoring the middle class in the 21st Century and giving more Americans the opportunity to get there. By making education, health care, child care, and house more affordable, we can give tens of millions of families a leg up." The text of the budget resolution does not allocate specific funding levels for health initiatives, but broadly gives committees with health policy jurisdiction large pots of money to work with, including more than $726 billion for the Senate HELP Committee and $486 billion for the House Energy and Commerce Committee. The Senate Finance and Ways and Means Committees are instructed to reduce the deficit by at least $1 billion each. Additional detail on the direction of those investments is provided in a memorandum to Democratic Senators, listing over half a dozen health care items as part of their budget resolution "framework." This includes considering investments in:

• ACA expansion extension and filling the Medicaid Coverage Gap
• Expanding Medicare to include dental, vision, hearing benefits and lowering the eligibility age
• Addressing health care provider shortages (Graduate Medical Education)
• Long-term care for seniors and persons with disabilities (HCBS)
• Health equity (maternal, behavioral, and racial justice health investments)
• Pandemic preparedness
• Paid Family and Medical Leave

Offsets listed include those from "health care savings" broadly, as well as additional detail for the Senate Finance Committee that allows for "hundreds of billions in additional savings by lowering the price of prescription drugs." Chairman Wyden said: "The Finance Committee will be a central part of the debate when it comes to lowering Americans' health care costs and making high-quality health care available to more families. That begins by lowering the cost of prescription drugs by making good on Democrats' promise to allow Medicare to negotiate a fair price with Big Pharma." Wyden also outlined his commitment to expanding Medicare benefits, including "giving seniors access to a dental, vision and hearing benefit," as well as investing in home-and community-based care and building on the Affordable Care Act. "That means extending the improvements to the middle-class tax credits for health insurance that have lowered premiums dramatically, and it means meeting the needs of the millions of Americans who have been deprived of health coverage just because they live in a red state that refuses to expand Medicaid," said Wyden.

Financial Services

The budget resolution includes instructions to the Senate Banking Committee to produce a $332 billion piece of the reconciliation bill, with the House Financial Services Committee's assignment totaling $339 billion. In the Senate Democratic memo Monday morning, the Banking Committee's instruction is broken down entirely in terms of housing-related spending, a major priority of both Chairman Sherrod Brown (D-OH) and House Financial Services Chairman Maxine Waters (D-CA). The Banking Committee's instruction includes creating affordable housing by investing in existing vehicles like the Housing Trust Fund, HOME, the Capital Magnet Fund and rural housing; providing down payment assistance and aid to renters; public housing capital investments; and "community investment" initiatives such as Community Land Trusts, community development block grants (CDBGs), zoning, land use and transit improvements.

While the House has not yet offered a correlate to the Senate Democratic memorandum, Chairman Waters released a statement on July 8 saying President Biden "assured me that housing would be included in reconciliation" and adding, "To say that the pandemic destabilized an already unstable housing market is an understatement. Our nation's chronic shortage of affordable housing has left millions of people at all income levels struggling to pay their housing costs, and in the worst cases, has locked people out of homeownership, led to people being evicted or foreclosed on, and exacerbated our homelessness crisis." When introducing her ambitious, $600 billion legislative housing package on July 15 — considerably more than the committee's $339 billion assignment in the budget blueprint — Waters said in a statement, "For the first time in a generation, we have a real opportunity to fix these deep-rooted issues in our housing system. We can end homelessness. We can make rental housing affordable. We can provide the American dream of homeownership. We can do all of this by finally making the investments that we have postponed, diminished or denied for years. The reconciliation bill provides us with a once-in-a-generation opportunity to provide the housing resources that our country so desperately needs."

The budget resolution and a memo summarizing reconciling instructions are available here. 

Chairman Wyden's statement is available here.