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May 9, 2022

What to expect in Washington (May 9)

A May 8 NBC News story cited unnamed sources familiar with Senator Joe Manchin’s (D-WV) thinking as saying Democrats shouldn’t wait for him to release a specific reconciliation proposal; rather, the White House should assemble a package he can support and hand that off to Democratic leaders in Congress. The sources said it would be out of character for Senator Manchin to write a partisan bill, and the White House wants a reconciliation bill more than he does. The story noted, “Manchin reiterated his support Monday for a filibuster-proof bill, saying his priority is to combat inflation. ‘My main thing is inflation, fighting inflation with tax reforms … We ought to get rid of this debt and start, in a responsible way, handling our finances.’”

Senator Manchin has continued to call for tax rate increases that are opposed by Senator Kyrsten Sinema (D-AZ), which led to the House-passed BBBA relying on non-rate increases. “Asked whether his specific tax rate proposals are essential to win his vote, Manchin said: ‘I’m just saying you've got a chance to get your financial house in order, you got a chance to start paying down your debt and taking inflation serious enough to change the trajectory,’” NBC said.

Global tax – A May 8 Wall Street Journal editorial, “Spare America From Yellen’s Global Tax,” said “the OECD plan could put U.S. companies at a disadvantage globally. For instance, the OECD offers more generous tax treatment for subsidies disguised as refundable tax credits of the sort that are common in Europe, while cracking down on the form of nonrefundable tax credit more common in the U.S. That illustrates how one point of the OECD plan is to prevent exactly the sort of tax-policy experimentation that can benefit the U.S. over the longer term. Ms. Yellen’s solution to the tax-credit conundrum is to press Congress to switch toward refundable tax credits to stay within OECD rules. Congress should defend its ability to impose whatever rules on credits, or anything else, it thinks might benefit the U.S. economy.”

Competitiveness – The first House/Senate conference committee meeting on the Bipartisan Innovation Act, which is what the eventual conference agreement between the America COMPETES and USICA bills is being called, is set for Thursday, May 12. In remarks in Ohio Friday, President Biden said the bill would “make generational investments in American innovation and manufacturing. Now, look, if we’re going to compete for the jobs of the future, we need to level the playing the field with our competitors. The bill does that.” He highlighted funding that could spur both US and foreign companies to increase semiconductor manufacturing in the United States. There are many major differences between the House and Senate bills and about 100 members of the conference committee, so reaching a final agreement could take some time.

An editorial in the Saturday Wall Street Journal said, “the Senate bill, unlike the House version, at least includes some useful provisions. One by Sens. Ron Wyden (Ore.) and Mike Crapo (Idaho) would re-establish Section 301 tariff waivers, which allow for exceptions. The Trump Administration imposed tariffs up to 25% on Chinese goods as a punishment for unfair trade practices. U.S. businesses have been punished instead. Chinese suppliers are the only source of some materials and goods. So the tariffs are a de facto tax that is passed on to customers and makes U.S. manufacturers less competitive.” The editorial was critical of 18 Republicans who voted against a motion to instruct conferees to keep the waivers provision.

This followed previous WSJ reporting that Biden administration officials are split on easing China tariffs: “On one side of the debate within the administration are Treasury Secretary Janet Yellen and Commerce Secretary Gina Raimondo, who favor easing the tariffs on some of the roughly $360 billion annually of Chinese imports put in place under the Trump administration… On the other are Trade Representative Katherine Tai and others who are reluctant to relinquish U.S. leverage over China in a continuing effort to reshape Chinese economic behavior…”

COVID funding – Senate Democrats are still deciding whether to attach a $10 billion-plus COVID funding package to a Ukraine funding bill and Republicans are still expressing opposition to doing so. The Administration is warning of a potential significant COVID wave this fall and winter and making the case that Congress needs to pass funding for vaccines, tests, and therapeutics. Dr. Ashish Jha, White House Covid-19 Response Coordinator, said on ABC’s This Week, “It’s going to make an enormous difference actually. So, let’s talk about what happens if we don’t get this. There is a new generation of vaccines that’s almost surely coming. The FDA is making final decisions on that. We will not have enough of those vaccines for all Americans. We’re going to run out of treatments, we’re going to run out of testing. So, if Congress doesn’t step up and fund these, I think, urgent emergent priorities – and they have to do it now. We can’t wait…”

A May 6 AP story said, “Recently an urgent White House request for $22.5 billion for COVID priorities failed to advance in Congress. Even a pared-back version is stuck. Part of the Biden administration's request involves $1.5 billion to replenish the Uninsured Program, which paid for testing, treatment and vaccine-related bills for uninsured patients. The program has now stopped accepting claims due to lack of money. That program, along with a less known Medicaid option for states, allowed thousands of uninsured people to get care without worrying about costs. Bipartisan support has given way as congressional Republicans raise questions about pandemic spending.”

On whether Congress can act on additional Ukraine aid before the end of the month, House Speaker Nancy Pelosi (D-CA) said on CBS’s Face the Nation, “I think we have to. The specificity with which we discuss these matters with the president of Ukraine… we’re very current on the needs and the urgency. And, again, we will have bipartisanship as we go forward with it.”

Congress - The Senate is in session, and the House is back in session. The House is slated to be in session only eight of the weeks remaining prior to the scheduled August recess: this week and next, plus three weeks each in June and July, with District work period and Committee Work weeks interspersed. There are no hearings scheduled in the tax-writing committees this week. Senate Majority Leader Chuck Schumer (D-NY) is expected to set up a Senate procedural vote for Wednesday, May 11, on S. 4132, to permit a woman to determine whether to continue or end her pregnancy and permit health care providers to provide abortion services.

Friday, May 13 (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.


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For additional information concerning this Alert, please contact:
Washington Council Ernst & Young
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