April 27, 2022
What to expect in Washington (April 27)
Senator Joe Manchin (D-WV) has expressed interest in a climate-focused reconciliation bill that also addresses tax changes and deficit reduction and is now also separately holding meetings to explore whether some version of an energy bill could be enacted on a bipartisan basis, outside of the reconciliation process. “If I can find something bipartisan, we don’t need reconciliation,” Manchin said in an April 25 Bloomberg report that said a package could seek to reform the federal oil and gas leasing process, aid domestic pipelines, increase “domestic production of energy in the near term and provide incentives for climate-related projects in the longer term.”
Senator Manchin repeated April 26 that he wants to increase the corporate tax rate to 25% and the capital gains rate to 28%, get rid of unspecified tax “loopholes,” and apply half of any revenue toward deficit reduction, saying it’s the “only way you’re going to fight inflation,” The Hill reported. Rate increases are opposed by Senator Kyrsten Sinema (D-AZ), blocking a path to simple majority enactment in the Senate. The report said, “Manchin’s vision of a tax- and deficit reduction-focused plan also comes as he and Sen. Lisa Murkowski (R-Alaska) have started a separate group aimed at finding a deal on energy and climate change legislation that could get 60 votes instead of the Democratic-only path of reconciliation.”
It’s uncertain how quickly a bipartisan compromise on energy issues could come together and whether 10 Republicans would support it as the midterm elections, trending in their favor, approach. The exact nature of the apparent dual-track approach Senator Manchin is pursuing isn’t exactly clear. He has made comments about aiding domestic energy production previously and chairs the Senate Energy and Natural Resources Committee. Politico suggested Manchin is looking at reconciliation and bipartisan bills as separate possibilities. “Just because Joe Manchin is launching bipartisan talks on an energy and climate change package doesn’t mean he’s throwing in the towel on Democrats’ long-sought party-line social spending and tax bill… While Manchin isn’t ready to torpedo all prospects for a party-line bill this year the way he quashed the $1.7 trillion package once called ‘Build Back Better,’ he flatly rejected any effort to set a new timeline...”
The Wall Street Journal said high energy prices and concern over dependence on Russian energy have given Senator Manchin leverage to push for more domestic fossil-fuel production, and that he has made international trips and spoken at industry events promoting the need to help domestic oil and gas producers. “Mr. Manchin has said publicly that one of his top requests is for the White House to use wartime powers to overcome permitting and legal troubles that have prevented the completion of a key pipeline out of his home state,” the story said. “He wants Mr. Biden to use the Defense Production Act to force through the completion of the Mountain Valley Pipeline, planned to transport natural gas from shale formations in northwestern West Virginia to southern Virginia.”
The prospects for any deal are uncertain, according to an April 26 Washington Post story saying, “Manchin privately told lawmakers in recent days that he wants Congress to approve a bipartisan energy deal in response to Russia’s invasion of Ukraine, which would complicate an already difficult timeline for a broader spending proposal,” and that the White House has submitted options to him. However, an unnamed White House adviser was quoted as saying, “There’s real fear inside the building that Manchin’s stonewalling will run out the clock on Biden’s legislative agenda throughout the rest of the year, leading the administration and congressional Democrats into November without anything else to offer voters.”
The Post story further said, “In recent weeks, White House officials have quietly tried gauging Manchin’s interest in a package that would consist primarily of clean-energy initiatives, prescription drug reform and higher taxes on the rich and corporations, the people said. The ideas discussed internally include more than $500 billion of deficit reduction…”
Financial services – The Senate voted 52-43 to confirm Lael Brainard to be Vice Chairman of the Fed Board of Governors. A procedural vote related to the nomination of Lisa Cook to be a Board member failed 47-51, attributable to COVID-related Senate absences (Leader Schumer voted nay in order to enter a motion to reconsider the vote at a later time, hence the 51 votes against).
COVID aid – Top Senate Democrats like Senators Ben Cardin (D-MD) and Tim Kaine (D-VA) said they are planning to combine the President’s forthcoming Ukraine supplemental funding request with the $10 billion COVID funding package that has been stalled since before the recent two-week recess. The funding number could grow, and Senator Cardin said he may seek to attach his bill to replenish the Restaurant Revitalization Fund which, like the COVID aid, was omitted from the earlier omnibus funding measure. Any combined COVID and Ukraine funding bill will be complicated by GOP efforts to extend the Title 42 border policy. On a related note, The Hill called a US-Russia prisoner exchange announced this morning “a major development, coming amid Russia’s war in Ukraine, which has dramatically escalated tensions and frayed relations between the U.S. and Russia.”
Retirement – Tax Notes reported April 26 that Senate Finance Committee Chairman Ron Wyden (D-OR) said there will be a SECURE 2.0 retirement policy markup in the Committee and “we’re sifting through” member ideas for the package, but he wouldn’t commit to holding the markup in the five weeks prior to the Memorial Day recess.
A retirement policy-focused episode of the WCEY podcast DC Dynamics has been posted to EY.com.
An EY Alert, “OECD releases public consultation document on Extractives Exclusion under Amount A for Pillar One,” is available here.
Friday, April 29 (at 12:00 p.m.) is the EY Webcast, “Tax in the time of COVID-19: Update on legislative, economic, regulatory and IRS developments.” Register.