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January 3, 2022

Congress returns as Build Back Better Act faces uncertain path following Manchin objections

The $1.7 trillion Build Back Better Act (BBBA, H.R. 5376) package of health, climate, education, low-income assistance and other provisions, paid for with international, corporate, and individual tax increases, faces an uncertain path in Congress following objections from Senator Joe Manchin (D-WV), citing the long-term budget implications of temporarily extending the Child Tax Credit (CTC) expansion and other provisions with the expectation that further extensions could be enacted in the future. "I cannot vote to continue with this piece of legislation," he said on Fox News December 19. The focus now is what provisions may be dropped to satisfy Senator Manchin, and there are other challenges to Senate passage, including state and local tax (SALT) deduction cap relief and the parliamentary process to ensure compliance with reconciliation rules.

In response to Senator Manchin's objections, Senate Majority Leader Chuck Schumer (D-NY) announced December 20, "The Senate will, in fact, consider the Build Back Better Act, very early in the new year so that every Member of this body has the opportunity to make their position known on the Senate floor, not just on television. We are going to vote on a revised version of the House-passed Build Back Better Act — and we will keep voting on it until we get something done." It isn't clear if and how the bill would be modified beyond its current form — changes have already been made to the House-passed version — and a vote could either allow the legislation to advance or serve as proof that it doesn't have sufficient support in its current form and lead to more significant revisions.

While the path forward remains unclear, Democratic leaders are determined to reach an agreement. "I want to get things done. I still think there's a possibility of getting Build Back Better done … " President Biden said December 21. "Senator Manchin and I are going to get something done."

Manchin's Views — A Post-Holiday Refresher

Senator Manchin has made comments in several forums, including the December 19 Fox News interview and subsequent statement from his office, then an appearance on local West Virginia radio and during a virtual call with Senate Democrats. On Fox, Senator Manchin said, "The inflation that I was concerned about, it's not transitory, it's real" and that fact, combined with "the debt that we're carrying, $29 trillion," geopolitical unrest, and the COVID omicron variant, had created an environment in which he could not support the BBBA. Suggesting he would not support proceeding with the legislation if it is brought up in the Senate, Senator Manchin said, "[W]hen you have these things coming at you the way they are right now — I've always said this, Bret, if I can't go home and explain it to the people of West Virginia, I can't vote for it." Senator Manchin has frequently said representing West Virginia puts him in a different position from other Democrats, and he has also suggested that he was rankled by the White House statement December 16 conceding a vote wasn't possible before year's end, which mentioned him by name.

In a December 22 Wall Street Journal (WSJ) article, a former aide to Senator Manchin noted that the Senator's latest comments were similar to views he expressed earlier in the year, including: in a July memo to Senator Schumer made public September 30 that set parameters for a $1.5 trillion bill; and a September 2 WSJ op-ed calling for a pause in consideration of the reconciliation bill to seek clarity on the trajectory of the pandemic and whether inflation is transitory or not, and to conduct a thorough analysis of the bill. The July memo called for means testing, something Senator Manchin has called for more recently in the context of the CTC.

Addressing the issue of temporary extensions of the CTC and other benefits, Senator Manchin said in the December 19 Fox interview, "[I]f you're going to do something and do it, pick what are prized priorities … like most people do and their families [and] businesses, and you fund them for 10 years and you make sure they deliver the services for 10 years. It's hard to deliver service for one year or three years or five years, and how are we going to continue them? … [W]e should be upfront and pick our priorities."

In a statement released December 19, Senator Manchin cited the Congressional Budget Office (CBO) estimate of $4.5 trillion for the BBBA if its temporary programs were extended over the budget window, a study that was requested by Republicans, saying Democratic leaders "continue to camouflage the real cost of the intent behind this bill."

Manchin also cited energy concerns: "If enacted, the bill will also risk the reliability of our electric grid and increase our dependence on foreign supply chains. The energy transition my colleagues seek is already well underway in the United States of America. In the last two years, as Chairman of the Senate Energy and Natural Resources Committee and with bipartisan support, we have invested billions of dollars into clean energy technologies so we can continue to lead the world in reducing emissions through innovation. But to do so at a rate that is faster than technology or the markets allow will have catastrophic consequences for the American people like we have seen in both Texas and California in the last two years."

During the West Virginia radio interview on December 20, Senator Manchin said a bill like the BBBA must go through the committee process, though he had agreed to skip the process for the American Rescue Plan Act (ARPA). "I think I made it very clear at that time, I won't continue to do major policy changes through reconciliation. It needs to go through a process," Manchin said. He appeared to welcome a Senate vote on the current version of the BBB to make clear where things stand. "Please put it on the floor. Maybe it will sink in that we have to look in a different direction than this far-reaching social agenda," Manchin said.

He again took issue with temporary extensions of the CTC and other provisions, arguing they masked the true cost of the bill: "The same bill I have in front of me right now that they kept putting in front of me, was the same $6 trillion bill from the beginning. The only thing that changed was the time element in which they would pay for things. And I said, 'That's [disingenuous] to tell someone who's getting a Child Tax Credit, it goes away in one year, OK? Or someone who gets any one of these other services and it goes away in two or three years when we are basically trying to [increase] taxes for 10 years to pay for them.' And that's the truth."

Punchbowl reported that during a virtual meeting with Democratic senators December 21, after Leader Schumer had announced that a Senate vote would indeed occur early in the new year, "Manchin indicated he was comfortable with Schumer's plan, but his position hasn't changed on BBB. Manchin noted that he'd publicly raised his concerns about inflation for months. Manchin also said he can't support any new or expanded programs that add to the federal debt. Of course, the vote on the motion to proceed to the BBB will likely fail because Manchin is opposed to the package in its current form." The expectation is Senator Manchin would vote against the procedural step (the motion to proceed) unless the bill is significantly revised before then, putting the measure on hold pending further negotiations.

Possible Paths Forward

How the bill may be revised is unclear, though some Democrats have offered ideas for what elements to retain and focus on. Prior to his December 19 television appearance and separate statement seen as essentially pulling the plug on the BBBA for the immediate future, Senator Manchin presented an offer to the White House. Additionally, the House New Democrat Coalition and Senate Finance Committee Chairman Ron Wyden (D-OR) have each outlined how the package could be reconfigured.

Manchin's offer included extending the ARPA Affordable Care Act (ACA) expansion, $500 billion-$600 billion in anti-climate change investments, and universal prekindergarten for 10 years, but nothing on the CTC, the Washington Post reported. The WSJ said, "The outline called for 10 years of funding for climate provisions, health care subsidies under the Affordable Care Act and universal prekindergarten … in an effort to change the design of Democrats' bill. Absent from Mr. Manchin's proposal was an extension of the expanded Child Tax Credit … "

Axios reported January 2 that Senator Manchin "is open to reengaging on the climate and child care provisions in President Biden's Build Back Better agenda if the White House removes the enhanced child tax credit from the $1.75 trillion package — or dramatically lowers the income caps for eligible families."

The New Democrats' statement called for "prioritizing doing a few things well for longer," which is an argument the group's leader, Ways & Means Member Suzan DelBene (D-WA), made in October when Senator Manchin previously balked at the top-line number as too high. At that time, leaders instead clipped the duration of some provisions, eventually drawing the ire of Manchin, who contends that future Congresses would be expected to extend the provisions, meaning the BBBA would have an ultimate cost much higher than the $1.75 trillion ceiling he has set.

In the wake of the Manchin fallout, Senate Finance Committee Chairman Wyden, who had influence over the House bill as the tax-writing committees pursued a cooperative approach, called for:

  • action on the CTC, which he called "Social Security for our children;"
  • "technology-neutral incentives tied to carbon emissions reductions;"
  • lowering prescription drug costs; and
  • extending expanded ACA tax credits for health coverage.

Asked during a December 26 Fox News Sunday interview whether Democrats are open to scaling back the bill even more or passing various pieces as stand-alone bills, Senate Finance Committee member Ben Cardin (D-MD) said, "Well, that's a strategy decision that's being negotiated. We are open to a way to reach the finish line. We want to make it as comprehensive as possible because the needs are just there … We understand the risks of inflation and we are committed to making sure that we really offset all expenses. So, I think, with those parameters, we want to see it as comprehensive as possible, but we need to make sure we have the votes to pass it, so that means it will be different than some of us would like to see." Senator Cardin further said, "we've got to find that sweet spot," and "a lot of us are going to be disappointed, but we're not going to let perfection be the enemy of getting something done."

Progressive Democrats, who were incensed with Senator Manchin following his objections and warned they might not support a smaller bill, are encouraging the President to act by executive order on some priorities. Rep. Pramila Jayapal (D-WA), who was among the members who held up a House infrastructure vote before becoming comfortable that President Biden could deliver the requisite Senate votes for the BBBA, said in a December 26 Washington Post op-ed, "The Progressive Caucus will continue to work toward legislation for Build Back Better, focused on keeping it as close to the agreed-upon framework as possible. At the same time, we are calling on the president to use executive action to immediately improve people's lives."

Process Hurdles

Politico reported that, during Democrats' December 21 virtual meeting, Senate Leader Schumer pushed back on Senator Manchin's argument in the WV radio interview that Democrats should start from scratch through the committee process, noting that the BBB has been the subject of over 60 Senate hearings. Senate Finance Committee Democrats had input over the tax portion of the House bill as part of a coordinated approach, but SFC Republican members complained about the lack of committee consideration, which is not only time-consuming but complicated by the 50-50 Senate party ratio that makes it more difficult to report bills out of evenly split committees.

A separate Politico story noted that even before Senator Manchin's latest objections, "the parliamentarian's vetting was already expected to spill into January. Now that Democrats may have to revamp the bill, that litigating is sure to drag out" and "Republicans stand ready to push for the removal of major pieces of the legislation, citing incompatibility with the strict rules of the budget maneuver Democrats are using to steer the bill past a GOP filibuster. The parliamentarian's final rulings will almost certainly change vital provisions in the version of the bill that's likely headed for a doomed Senate vote."

Child Tax Credit

A main question is whether Democrats can address the expiration of the expanded CTC, which was increased by ARPA to $3,000 ($3,600 for children under 6) and enhanced to provide monthly payments to some taxpayers, or whether proponents of extending the expanded CTC are willing to see the BBBA move forward without it.

A December 20 Washington Post article said that despite other potential areas of compromise, "Manchin's rejection of the expanded Child Tax Credit would represent an extraordinarily difficult condition for the administration to support. The White House has repeatedly argued that its one-year expansion of the existing expanded child benefit, approved by Democrats in March as part of Biden's stimulus, has dramatically reduced child poverty and improved the well-being of millions of poor families. If that program expires at the end of this month — as it now appears likely to do — then child poverty could move higher in 2022 in the months before the midterm elections."

During the December 20 radio interview, Senator Manchin again insisted on means testing for the CTC. "When they first brought the bill out, I said, 'Chuck Schumer, there is nothing in there about accountability — holding people accountable — there is no work requirement, there is no means testing to where you are targeting the people that really need it.' To give you an example, the Child Tax Credit — do you believe people making $200,000 and $400,000 would still get the Child Tax Credit the same as someone making $50,000, $60,000 or $70,000 that really needs it? … So many things we can fix … that they won't even talk about."

Prior to the holiday recess, House Speaker Nancy Pelosi (D-CA) said it's unclear whether a standalone CTC extension bill can pass the Senate — a view the White House agrees with — and appeared inclined to use the potential lapse to urge action on the broader BBBA. "I don't want to let anybody off the hook on the BBB to say 'well, we covered that one thing, so now the pressure is off,'" she said December 15. "I think that that is really important leverage in the discussion on BBB, that the children and their families will suffer without that payment … And so, we're just still optimistic about BBB passing, and perhaps even if it were after the 1st of the year, which I hope it is not, that it could be retroactive, if it's early enough … "


There has been more attention on the bill's spending provisions, but the tax increase proposals continue to be under discussion. The Washington Post reported December 24 that Senator Manchin told the White House he could support some version of a billionaire's tax, which was omitted from the House-passed BBBA in favor of a larger high-income surtax; and, regarding that surtax provision, Senator Kyrsten Sinema (D-AZ) "has questioned whether owners of 'pass-through' entities — companies structured so the owner 'passes through' income onto their personal income tax returns — should be exempted from a new 'surtax' intended to fall on the very rich." It's "unclear whether Sinema will make the request conditional for advancing the broader economic legislation," the report said.

A billionaire's tax has been proposed and pushed by Chairman Wyden but wasn't picked up in the House bill, and Speaker Nancy Pelosi and House Ways & Means Committee Chairman Richard Neal (D-MA) are among the detractors. In late October, as the House readied a smaller bill for potential consideration and the billionaire's tax was one proposal being pursued in response to Senator Sinema's aversion to rate-based tax increases, Senator Manchin expressed concern about "the connotation that we're targeting different people," the New York Times reported.

As his reported comments about a billionaire's tax suggest, it isn't exactly clear where Senator Manchin stands on tax increases under the bill and whether his views conflict with the anti-rate increase position of Senator Sinema. He has made comments regarding rates and has continuously spoken about his support of rolling back portions of the Tax Cuts & Jobs Act (TCJA). Politico reported that during the December 21 virtual meeting among Democrats, "Manchin said the Department of Veterans Affairs should negotiate drug pricing and called for a focus on tax rates. He wants to see the rich pay more in taxes, he told the caucus."

During the December 20 WV radio interview, Senator Manchin suggested concerns over the tax code were his primary motivation for considering the BBBA, saying he told the President he could accept a $1.75 trillion bill if it included a "good" tax reform. "The only reason I even voted to get on reconciliation was to fix the taxes, so that everybody paid their fair share: the ultra-super wealthy, the corporations that weren't paying anything," he said. "Everybody would pay their fair share and it would be competitive, it wouldn't be just retribution and be basically payback because they got a big tax break in 2017." He said there is an opportunity to fix the flaws of the 2017 TCJA, which Democrats unanimously opposed. "So if we all disagree with Republicans' reconciliation on tax cuts, don't you think we can sit down and fix a fair and equitable tax code?"

On another matter, rather than accepting the House bill's increase in the SALT deduction cap to $80,000 through 2030, Senate Democrats are reportedly considering eliminating the cap entirely for those with income below a certain threshold. Senator Bernie Sanders (I-VT) is pushing for an income threshold of $400,000 but Senator Robert Menendez (D-NJ) wants a higher amount such as $550,000. Presumably, the relief would be phased out to avoid punitive marginal tax rates, but it's unclear whether such a phaseout would begin or end at these or another income threshold.

The Post story also noted that "Alan J. Auerbach, an economist at the University of California at Berkeley, has been advising Manchin personally about tax policy."

A preliminary Joint Committee on Taxation (JCT) revenue estimate of Senate Finance Committee's revised revenue provisions, dated December 20, has been posted to the Senate Democrats' website.

The Congressional Research Service (CRS) published a report December 22, "Senate Finance Committee Tax Provisions in the Build Back Better Act."

Related Deadlines

Time is seen as of the essence for the BBBA for a number of reasons. Early 2022 could represent one of the best — and possibly last for some time — chances for Democrats to act on their priorities, particularly on climate change, before the midterm season and in light of the possibility that they may no longer hold both chambers of Congress after the elections. And there are additional global pressures related to climate goals and tax policy.

The Washington Post December 19 reported on the necessity of the climate provisions. "Without a reduction of that speed and scale, the United States would fall short of the targets it committed to under the 2015 Paris agreement, potentially locking in a future of increasingly destructive forest fires, deadly floods and droughts. Already, record-breaking hurricanes and fires are testing the federal government's ability to respond to overlapping disasters. It remains unclear whether Democrats can pass a standalone climate bill next year. Senators vowed to press ahead, but held back from divulging details on whether they would scale back their ambitions to further address Manchin's concerns."

Likewise, an article in the December 24 WSJ said, "Without the climate provisions in the social policy legislation, Mr. Biden also risks failing to achieve his goal of halving U.S. emissions by the end of the decade, a target he promised world leaders he would meet."

An editorial in the December 30 WSJ suggested the electric vehicle incentives are necessary for automakers to meet the Administration's newly issued "fuel-economy standards that effectively mandate that electric cars make up 17% of auto sales in 2026, up from about 3% this year. That was the day after Sen. Joe Manchin rejected President Biden's Build Back Better plan, which includes a cornucopia of EV subsidies."

The 15% GILTI rate and country-by-country calculation in the BBBA are necessary to bring the US into compliance with the OECD-led global tax deal. As the WSJ reported December 23, "The tax increase on U.S.-based multinational corporations is wrapped inside broader legislation to address climate change, child care and poverty. Hopes for passage of the legislation suffered a serious blow Sunday when Sen. Joe Manchin … said he would oppose the centerpiece of President Biden's economic agenda as currently written. However, the international tax proposals have been relatively uncontroversial among Democratic lawmakers, despite objections from businesses. Sen. Manchin cited other issues with the legislation in expressing his opposition and hasn't balked at the tax increases. Democratic leaders will try to resurrect some version of the bill early next year and the Biden administration officials have emphasized the importance of following through on the commitments the U.S. made in the global tax negotiations."

Below is a timeline of key dates regarding the BBBA.

September 2

Sen. Manchin WSJ op-ed expressing concerns over inflation

September 15

Ways & Means Committee reported out tax increase portion of the House bill

October 20

Sen. Sinema's opposition to tax rate increases forced pivot to non-rate increases

October 28

President Biden released framework of bill he believed could pass Congress, and House Democrats released a revised bill with several provisions omitted, but House progressives prevented votes on infrastructure and BBBA from proceeding

November 3

House Democratic leaders released a manager's amendment to the BBBA that included changes to the state and local tax deduction cap and add-backs from the original Ways & Means bill that were dropped in the October 28 version

November 4

An additional manager's amendment made further changes, including changing the increase in the state & local tax deduction cap to $80,000 through 2030

November 5

The House passed the infrastructure bill but not the BBBA after moderate Democrats withheld support pending CBO estimates

November 19

The House passed the BBBA following an overnight speech in opposition from House Republican leader Kevin McCarthy (R-CA)

December 16

Pres. Biden, Sen. Schumer said Senate BBBA vote won't happen before Christmas

December 19

Sen. Manchin announced on Fox News, "I cannot vote to continue with this piece of legislation," issues additional statement

December 20

Sen. Schumer announced there will be a BBBA vote in early 2022; Manchin detailed concerns with BBBA on WV radio

December 31

Expanded Child Tax Credit expired

January 3

Beginning of Senate session

January 10

House back in session

January 12

Former Senate Majority Leader Harry Reid (D-NV) lies in state

February 18

Expiration of government funding


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