August 1, 2022
What to expect in Washington (August 1)
Senator Joe Manchin (D-WV) was on five political talk shows Sunday and continued to strongly defend the Inflation Reduction Act that he has embraced as his bill and that Senate Democrats are planning to process this week. A focus heading into the week is whether Senator Kyrsten Sinema (D-AZ), who had a hand in shaping the House BBBA but who has long opposed rolling back carried interest, will declare her support for the measure — which needs the vote of all 50 Democratic senators (plus the VP) to pass the 50-50 Senate under budget reconciliation — or demand changes. Manchin said Sinema has shaped the bill already and that it does not raise taxes, only closes a loophole through the 15% corporate alternative minimum tax (CAMT).
The bill would fund climate and energy provisions and a three-year extension of enhanced Affordable Care Act (ACA) subsidies with a 15% CAMT on adjusted financial statement income for corporations with profits over $1 billion, increased IRS enforcement funding, a carried interest holding period for capital gains treatment of five years (up from three), and Medicare drug negotiation. It achieves $300 billion in deficit reduction.
On NBC's Meet the Press, Manchin said, "We should not increase taxes, and we did not increase taxes, Chuck. That's what we scrubbed out from that Thursday when we shut down until we started talking again on Monday. The only thing we have done is basically say that every corporation of a billion dollars of value or greater in America should pay at least 15 percent minimum corporate tax … Most businesses and all corporations that I know pay 21 percent. So that's not a tax increase; it's closing a loophole."
He said Senator Sinema "basically insisted that — no tax increases. We have done that. She was very, very adamant about that, and I support and I agree with her. She was also very instrumental in making sure that we had drug prices that Medicare could compete on certain drugs to bring it down so that there wouldn't be an impact on individuals … She's done all this, so she has a tremendous amount of input in this piece of legislation. And I would like to think she would be favorable towards it."
On CBS's Face the Nation, Senator Manchin said Senator Sinema has been "so involved in this legislation. When you think about it, she's the one that really negotiated and worked very hard on getting Medicare, allowing them to negotiate for lower drug prices, saving $288 billion. That's tremendous, which I support her completely on that. She's always been adamant about we're not going to be raising taxes. And I agree with her wholeheartedly. I made very — very, very carefully — evaluations that we wouldn't raise any taxes. And that was the last scrub that was done." He said he has not tried to lobby for her support.
On Fox News Sunday, Senator Manchin said, "I don't think anyone in West Virginia thought that anyone could get by with not paying at least 21%. So, we did not raise taxes. We've closed loopholes. That's all we did. I made sure there was no tax increases in this whatsoever."
On CNN State of the Union, Senator Manchin said of the CAMT, "We're just saying, close the loopholes and collect the taxes that are owed to the Treasury and the United States people. That's all we're trying to do. And we didn't do it. So, we're not adding there. We're not putting a burden on any taxpayers whatsoever. And we're going to create more energy for them to pay lower prices at the gas pump, hopefully lower prices at the food store, and lower prices basically in all their daily needs, energy prices especially."
On ABC's This Week, Senator Manchin said of the long Build Back Better process, "We've taken a $3.5 trillion aspirational bill that I never could come to an agreement on any way, shape, or form — but I tried, couldn't get there. And we've taken $3.5 trillion of spending down to $400 billion of investing without raising any taxes whatsoever." On the same program, Senator Bill Cassidy (R-LA) said, "much of what he says is just not true. For example, they are raising taxes. According to the Joint Committee of Taxation, taxes will be raised almost $17 billion in the first year on those who are making less than $200,000, and the percent of taxes raised for individuals increases over time for the middle class and the lower income."
Process — The bill is before the Senate Parliamentarian because Democrats are using the reconciliation process that can allow it to pass with the votes of 50 Democratic senators plus the VP, so it must comply with reconciliation rules. Politico reported that Senate Majority Leader Chuck Schumer (D-NY) has told members to be prepared for consideration into the weekend. The process will culminate with the vote-a-rama rapid-fire series of amendment votes, which would be backed up against the start of the August recess. Punchbowl reported, "we're still skeptical of this proposed schedule for one simple reason: Everything takes longer than you'd expect this Congress. Everything. So we could see the Senate not even starting on the vote-a-rama until next week."
Energy — Bloomberg Government reported last night that the bill "would reinstate and increase a long-lapsed tax on crude and imported petroleum products to 16.4 cents per gallon … The Superfund tax, which previously stood at 9.7 cents per barrel until it lapsed at the end of 1995, is paid by refiners and other importers to help fund the clean-up of hazardous waste sites. In addition to increasing the tax, the Senate proposal would index the fee to inflation."
Finance Committee Democrats released a section-by-section summary of energy provisions last night, which is attached to this Alert.
Distributional effects — Senate Finance Committee Republicans July 30 released JCT estimates showing that under the bill taxes will increase by $16.7 billion on American taxpayers earning less than $200,000 and another $14.1 billion for taxpayers earning between $200,000 and $500,000. A spokesperson for Finance Committee Democrats said the analysis isn't complete because "it doesn't include the benefits to middle-class families of making health insurance premiums and prescription drugs more affordable. The same goes for clean energy incentives for families," Politico reported.
Finance Republicans previously cited a JCT analysis they said shows the CAMT "would overwhelmingly hit U.S. manufacturers at a time when they can least afford it." A story in today's Wall Street Journal on the analysis showing manufacturers and other companies making capital investments paying the bulk of the proposed new tax explained, "For accounting purposes, deductions for capital investments are spread over the life of the asset. For tax purposes, they are often accelerated, reducing current tax rates. The proposal … would largely erase that difference for affected companies, raising their taxes now and deferring or denying the benefit of accelerated depreciation." Politico Morning Tax pondered this morning, "will Sinema actually work to put any carveouts for depreciation in the book tax?"
Backstory — There have been several stories on how the Schumer-Manchin deal came together after previously appearing to collapse. The Washington Post suggested that Senator Manchin returning to the negotiating table after saying two weeks ago that he would need to see a drop in the next inflation numbers to consider any climate or tax provisions may have been helped along by some chiding from fellow members, who reminded him of the practical effects climate change is having. "Sen. Thomas R. Carper (D-Del.), for one, approached him during a vote on the Senate floor, brandishing a list of recent deadly climate catastrophes that warranted Manchin's attention," the report said, adding that Senator Chris Coons (D-DE) encouraged Manchin to silence critics that he was obstructing the Democratic agenda and "prove them all wrong" by signing off on a bold climate deal.
Summary of Subtitle D - Energy Security