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May 13, 2024

What to expect in Washington (May 13)

The Senate-passed five-year Federal Aviation Administration (FAA) reauthorization and taxes bill is set to be cleared by the House this week, leaving government funding and a farm bill both due September 30 as the only deadlines facing Congress prior to the elections. With deadlines dwindling in an election year, policy attention is naturally turning away from legislation and toward the regulatory process.

A May 8 Politico story on "Biden's race to Trump-proof his legacy" said the President "is in a race against time to secure a New Deal-sized legacy before" former President Trump potentially returns to power. Doing so, the report said, requires the Administration to allocate unspent funds approved in the American Rescue Plan Act, bipartisan infrastructure law, CHIPS & Science Act, and Inflation Reduction Act. The report said:

  • Of the $1.1 trillion those four laws provided for direct investments on climate, energy and infrastructure, less than 17% has been spent as of April.
  • Of the $884 billion provided by the infrastructure law and the American Rescue Plan, only $125 billion has been spent, and $300 billion won't be available to spend until the next two fiscal years.
  • Of the $54 billion made available via the CHIPS and Science Act, less than $700 million has been awarded, though the Commerce Department has recently announced $29 billion for semiconductors.

A May 6 Wall Street Journal story that discussed former President Trump's use of the Congressional Review Act (CRA) in 2017 said, "If he wins a second term, Trump plans to use the same tactic to unravel as much of President Biden's agenda as possible, according to people close to him. And senior Biden aides are doing everything in their power to stop him, setting off a behind-the-scenes scramble to Trump-proof as many regulations as they can before they become vulnerable to being overturned under the 1996 law." The story said, "Like past presidents before him, Trump could sign an order freezing all proposed regulations, a move that would make it easier to undo them before they are completed. He could also undo many Biden administration executive orders with the stroke of a pen. But unwinding final regulations that he can't overturn with the CRA could prove more difficult … It would likely require proposing new regulations … "

A CRA joint resolution of disapproval must be introduced during a 60-days-of-continuous-session period beginning on the day Congress receives the rule, which counts every calendar day, including weekends and holidays, and excludes only days that either chamber (or both) is gone for more than three days pursuant to an adjournment resolution. A CRA joint disapproval resolution meeting certain criteria cannot be filibustered in the Senate, according to the Congressional Research Service (CRS).

A May 7 Forbes article said, "a presidential transition offers a unique window in which a disapproval resolution could land on a sympathetic president's desk. This is what happened in 2017, when newly inaugurated President Trump signed 15 resolutions disapproving regulations issued toward the end of the Obama administration. President Biden himself signed three disapprovals of Trump-era rules when he took office in 2021." Further, "We won't know for sure until after the 118th Congress adjourns for the year what the cutoff date is for the next Congress's review, but based on the current congressional calendar, it could be as early as May 22, 2024."

A May 7 Washington Post story suggested President Biden's recent uptick in regulatory action is a show of strength and that he plans to fully utilize his executive powers in the run-up to the election. "With Congress largely idle, activists, lawmakers, political strategists and White House aides are all angling to assess what the president can accomplish on his own in the coming months, and how to amplify the image of an active president for voters," the story said. "The result has been a rush of policymaking in recent weeks, as Biden aides and administration officials roll out regulatory and executive changes on a host of issues and debate the electoral implications of taking additional actions on more politically controversial topics."

2025 tax cliff — President Biden has made his revenue offset ideas well-known in his budget proposals and they are coming into greater focus ahead of TCJA individual and passthrough provisions expiring at the end of 2025. There was significant attention on National Economic Advisor Lael Brainard's May 10 speech on the "Tax Debate Ahead," which called for not only paying for tax cuts that are extended but using the "2025 tax debate as an opportunity to meet our national needs by raising revenue overall" through tax increases on the wealthy and large corporations. "The bottom line is, the President is fighting for a better approach, one that gives working people a fair shot and lowers deficits by asking the wealthy and big corporations to pay their fair share," she said. She listed proposals to increase the corporate rate to 28%, the CAMT rate to 21%, and the stock buyback tax to 4%. Brainard restated the President's pledge for no tax increases on those earning less than $400,000.

The President's offset proposals are also drawing greater contrasts with Republicans, who want to extend all of the 2025 TCJA expiring provisions. There is disparity among Republicans over revenue offsets: Some Senate Finance Republicans suggest the economic growth potential for tax cuts makes revenue increases unnecessary, while House Republicans are more open to paying for extensions. House Ways & Means Committee Chairman Jason Smith (R-MO) said last week that some Republicans want to increase the 21% corporate tax rate, and that other offsets beyond that may be necessary.

A story in the May 11 Wall Street Journal that focused on the Brainard speech said, "The Biden administration's must-haves set up a contrast with Republicans, who generally want to extend all expiring tax cuts and are far less concerned about making up lost revenue elsewhere. The administration's positions also pose a challenge for Democrats, who have struggled to agree on the trillions of dollars of tax increases needed to cover the cost of extending the portion of the tax cuts they favor." Additionally, the story said, "Biden's attempt to raise revenue to pay for tax-cut expirations could be much tougher to achieve than holding the $400,000 line, because there are plenty of objections to higher taxes and few lawmakers in either party who want to raise taxes on the bottom 95% of households. Biden's budget proposal, released in March, lists plenty of tax increases that would cover that cost, including a higher corporate tax rate, new rules for multinational corporations … "

In contrast to President Biden's tax increase proposals, former President Trump May 11 called for additional tax cuts if he wins a second term as president, Bloomberg reported. "Instead of a Biden tax hike, I'll give you a Trump middle class, upper class, lower class, business class big tax cut," Trump said at a rally Saturday in Wildwood on the New Jersey shore.

Global tax — Brainard further cited the global tax agreement, saying it "will finally address the race to the bottom in corporate taxes, while enabling businesses to compete and allocate capital based on workforce talent and market factors instead of tax minimization strategies." She said, "Many of the world's largest economies are implementing this transformational agreement. It is critical that we join them in 2025."

Congress — House Ways & Means Committee Republicans May 8 introduced a series of bills on tax-exempt issues, and one (H.R. 8292) to increase penalties for unauthorized disclosure of taxpayer information. Some of the tax-exempt issues were raised during a December 2023 Oversight Subcommittee hearing. The Committee said H.R. 8292 would increase the maximum penalty for the unauthorized disclosure of tax information to a fine in any amount up to $250,000, or imprisonment up to 10 years, or both. The Committee may take up the bill this week.

In the House, votes this week begin Tuesday at 6:30 p.m. and include passage of the Senate-passed FAA bill and some Energy & Commerce bills, including the Critical Infrastructure Manufacturing Feasibility Act (H.R. 5390), to direct the Secretary of Commerce to conduct a study on the feasibility of manufacturing in the US products for critical infrastructure sectors; and the Promoting Resilient Supply Chains Act (H.R. 6571), to establish a critical supply chain resiliency and crisis response program at the Department of Commerce.

The Senate is also back on Tuesday, with a vote at 5:30 p.m. related to the nomination of Courtney Diesel O'Donnell to be US representative to the UN Educational, Scientific, and Cultural Organization.

The only hearing currently scheduled in the tax-writing committees is a May 16 Senate Finance Committee hearing on "Rural Health Care: Supporting Lives and Improving Communities."

On Wednesday, May 15 at 10:15 a.m., the House Committee on Education & the Workforce will hold a hearing on "Examining the Policies and Priorities of the Department of Health and Human Services" with Xavier Becerra, Secretary, U.S. Department of Health and Human Services.

On Thursday, May 16 at 10 a.m., the Senate Health, Education, Labor & Pensions Committee will hold a hearing on "Examining the Dental Care Crisis in America: How Can We Make Dental Care More Affordable and More Available?"

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Contact Information

For additional information concerning this Alert, please contact:

Washington Council Ernst & Young