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December 9, 2022

What to expect in Washington (December 9)

New this morning: Senator Kyrsten Sinema of Arizona told CNN she is leaving the Democratic party and registering as an Independent. "Removing myself from the partisan structure — not only is it true to who I am and how I operate, I also think it'll provide a place of belonging for many folks across the state and the country, who also are tired of the partisanship," she said. The exact implications of the switch are unclear. The CNN report said, "While [Independent Senators] Sanders and King formally caucus with Democrats, Sinema declined to explicitly say that she would do the same. She did note, however, that she expects to keep her committee assignments — a signal that she doesn't plan to upend the Senate composition," because Senate Majority Leader Chuck Schumer (D-NY) controls the party's committee rosters. "When I come to work each day, it'll be the same," Sinema said.

Government funding — A bipartisan agreement on topline spending numbers for an omnibus appropriations bill remains elusive with a week to go before current government funding runs out on December 16. A week-long continuing resolution (CR) through December 23 seems likely as negotiations continue. Democrats and some Republicans are holding out hope for an omnibus bill, which would boost defense and other spending. Some Republicans are pushing for a CR into early 2023 when they will have more influence with GOP control of the House; there are some who want to use fiscal deadlines to force action on issues like border enforcement and IRS funding. House Democrats continue to cite a year-long CR as a fallback option.

Politico December 7 reported Senate Appropriations Ranking Member Richard Shelby (R-AL) as saying, "When will we get to yes? Might be right before Christmas. Might be right after Christmas." Senator Shelby, who is retiring, previously said Republicans and Democrats are about $25 billion-$26 billion apart on topline spending numbers for a $1.7 trillion omnibus appropriations bill. The report said Democrats plan to offer their own plan on Monday. Bloomberg reported Senator Shelby as saying December 8 that deals on an omnibus typically come when a deadline is imminent: "We keep talking … serious negotiations are going on."

Tax — Top members of the tax-writing committees including Ways & Means Committee Chairman Richard Neal (D-MA) and Senate Finance Committee member Michael Bennet (D-CO) have said the absence of a topline spending deal is impeding tax negotiations. Bloomberg Tax reported Chairman Neal as saying there's "no holdup" on negotiations over a tax package, members just need top-line numbers, and a year-end tax deal could resolve some issues for the GOP when they retake the majority. "I do think that the biggest package unlocks a lot of issues as they claim the majority in January," Neal said. "I would think they would want to get a lot of this done now, rather than revisiting."

Senator Bennet tweeted December 7, "Before Congress goes home, we need to pass an expanded Child Tax Credit once again — the biggest tax cut for working people in American history." A December 8 Law360 story cited another Finance Committee member, Senator Sherrod Brown (D-OH), as saying during a news conference that Democrats will not support addressing relief from the Section 174 R&D amortization requirement and other corporate tax issues unless Republicans work with them on expanding the CTC. "That's the deal; it's on the table," Brown said. "We say to Republicans, 'Accept the deal, and we'll move forward.'" The report cited Ways & Means Ranking Republican Kevin Brady (R-TX) as repeating concerns about attaching a CTC expansion to a year-end package, saying Democrats should focus on bipartisan provisions: "Insistence on child tax credits may blow this up, including the traditional tax extenders."

Politico referred to those holding the news conference as the "CTC Six," including Senators Brown, Bennet, and Cory Booker (D-NJ), and Reps. Rosa DeLauro (D-CT), Ritchie Torres (D-NY), and Suzan DelBene (D-WA).

The Congressional Budget Office December 7 released "Options for Reducing the Deficit: 2023 to 2032," a periodic compendium of spending and revenue options to reduce the deficit, including increasing individual tax rates, eliminating or limiting itemized deductions, and changing the tax treatment of capital gains from sales of inherited assets.

House Committees — While the House Republicans' steering committee met on Wednesday (December 7) to decide on committee chairmanships for their new majority, there was no decision on perhaps the most closely watched post, for chairman of the tax-writing Ways and Means Committee, as GOP leaders moved to postpone resolution of the most hotly contested races. The Ways and Means chairmanship, which is being sought by Reps. Vern Buchanan (R-FL), Jason Smith (R-MO) and Adrian Smith (R-NE), may not be determined until as late as January, after the January 3 House vote for the next Speaker.

Punchbowl reported December 8, "The Steering Committee, which recommends who will serve on committees and wield gavels, was initially scheduled to consider the full slate of chairs this week. The GOP conference typically selects each committee's top lawmaker after Election Day so they can build up their staff and get ready for the next Congress. But as part of [Rep. Kevin] McCarthy's quest to try to win the votes of the majority of the House, he's put the election off to avoid angering lawmakers about who does — and doesn't — get gavels." The report said, "if Buchanan loses Ways and Means, he could end up retiring before Jan. 3, according to GOP lawmakers. That would mean House Republicans would hold 221 seats and McCarthy's path to the speaker's chair becomes even narrower. McCarthy allies are very concerned about Buchanan's potential retirement."

The steering committee reportedly did approve a waiver sought by Rep. Virginia Foxx (R-VA) allowing her to seek the chairmanship of the Education and Labor Committee. (Foxx had faced a term limit after occupying the top Republican spot on the committee since 2017.) Foxx is now considered the frontrunner for the position. Foxx has said she plans to change the panel's name back to the Education and the Workforce Committee, which was the previous name under Republican rule, and told Bloomberg Law that under her leadership, the committee "will amplify the voices of job creators and workers, not the radical demands of union bosses … The Committee will no longer be a lackey for Big Labor."

Meanwhile, on Tuesday (December 6), House Democrats elected Rep. Brendan Boyle (D-PA) ranking member on the Budget Committee, replacing retiring Chairman John Yarmuth (D-KY). Boyle was unopposed for the slot. The committee's chairmanship is uncertain, though Jason Smith (R-MO) would have the inside track if he does not win the Ways and Means job.

Senate — Democrats re-elected Senator Chuck Schumer (D-NY) as Majority Leader, Senator Dick Durbin (D-IL) as Whip, and made Senator Patty Murray (D-WA) President Pro Tempore. The major change to the current leadership slate was adding Senator Brian Schatz (D-HI) as deputy conference secretary, replacing Murray on the leadership team.

Bloomberg reported Senator Schumer as saying Senator Raphael Warnock's (D-GA) victory in the December 6 runoff, giving Democrats a 51-49 majority in the next Congress, gives them more breathing room. "We'll have the advantage on every committee," he said, adding it means committees will have greater oversight ability and subpoena power. Senator Schumer's comments were made prior to Senator Sinema's announcement last night.

A December 7 Wall Street Journal story (again, prior to Senator Sinema's announcement) said the 51-49 majority for Democrats "enhances their power by allowing them to more easily advance President Biden's nominees while also providing slightly more flexibility on legislation." It said advantages include giving Democrats a majority on committees, as opposed to the even split under the current power-sharing agreement; more flexibility on crafting legislation; and insurance against possible resignations or deaths.

Meanwhile, attention has turned to the 2024 Senate election map, with 20 Democrats up for re-election plus two independents that caucus with the Democrats as well as Senator Sinema, compared to only 10 Republicans up for re-election. NBC News reported, "Democrats have a reasonably good chance of winning back the House in 2024, because there are 17 House Republicans who won in congressional districts carried by President Biden — and that number could increase to 18 — versus just five House Democrats who won in districts carried by Donald Trump." Regarding Democrats up for re-election, "Three of these Senate Democrats hail from states Trump won in 2020: Sens. Joe Manchin, D-W.V., Jon Tester, D-Mont., and Sherrod Brown, D-Ohio. An additional five are from states that Biden won by less than 4 percentage points: Sens. Kyrsten Sinema, D-Ariz., Debbie Stabenow, D-Mich., Jacky Rosen, D-Nev., Bob Casey, D-Pa., and Tammy Baldwin, D-Wis."

Next week, the Senate is expected to consider the $847 billion National Defense Authorization Act compromise bill, which passed the House 350-80 December 8.

Global tax — On December 8, the OECD's Center for Tax Policy and Administration held a webinar on their newly released consultation document on Pillar One Amount B, which is targeting 2024 implementation. Speakers, including acting deputy director Achim Pross, emphasized that the intention in designing Amount B is to strike a balance between simplicity and certainty and that this is still a work in progress. Public input on the progress made so far is very welcome, as outlined in the consultation document. This includes commentary on scoping; pricing methodology; exceptions and the applicability of a methodology for physical goods to digital. This input is requested to be submitted by January 25. Also of note, is Pross's mention of the intended release of an Amount A document on DSTs and other relevant unilateral measures before Christmas.


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