With the House and Senate on recess, now is a good time to provide a status update on where things stand for legislation that President Joe Biden wants enacted into law.
The President released the following plans earlier this year:
- The American Jobs Plan:
- Released on March 31
- Includes over $2 trillion in tax increases on corporations and fossil fuels
- Price tag lowered to $1.7 trillion and is now $1.2 trillion
- Lawmakers have begun discussing this plan
- The American Families Plan:
- Released on April 28
- Includes roughly $1.6 trillion in tax increases on wealthier taxpayers and increases tax compliance
- Lawmakers have yet to have in-depth discuss on this plan
Neither of Biden’s plans have been turned into legislation (more on this later)
Congressional Democratic leaders have employed a two-track approach to turning the American Jobs Plan and the American Families Plan into legislation. Lawmakers are expected to work on both tracks simultaneously
Track One:
- The American Jobs Plan:
- In the Senate:
- President Biden and a bipartisan group of Senators agreed on a $1.2 trillion infrastructure proposal that does not increase personal or corporate income taxes
- Senate Democratic leaders hope to vote on this bill as soon as next week
- This goal will be hard to achieve given that legislation is not yet written
- Senators are currently writing up the legislative text for this bill
- The Senate has formed working groups to straighten-out unsettled provisions in the $1.2 trillion infrastructure proposal
- The creation of working groups usually means that Committees will not be involved in writing the legislative text
- The bill is expected to be based on the “framework” that was released in June
- The framework includes a topline dollar figure of $579 billion for new spending on roads, bridges, public transit, ports, airports and broadband technologies
- The framework’s cost is expected to be fully paid-for by:
- Reducing the IRS tax gap (originally in the American Families Plan)
- Improving unemployment insurance program integrity
- Redirecting unused unemployment insurance relief funds
- Repurposing unused relief funds from 2020 emergency relief legislation
- State and local investment in broadband infrastructure
- Allowing states to sell or purchase unused toll credits for infrastructure
- Extending expiring customs user fees
- Reinstating Superfund fees for chemicals
- 5G spectrum auction proceeds
- Extending mandatory sequester
- Strategic petroleum reserve sale
- Public private partnerships, private activity bonds, direct pay bonds and asset recycling for infrastructure investment
- Macroeconomic impact of infrastructure investment
- While details are currently scant for how these provisions will work, some highly respected budget prognosticators off Capitol Hill say these provisions will not fully offset a $1.2 trillion bill
- A bipartisan group of 58 House lawmakers, called the Problem Solvers Caucus, has endorsed this plan
- Senate Finance Committee Chairman Ron Wyden (D-Ore.) wants to add tax increases to the bill
- He seeks an increase in the corporate income tax and taxing unrealized capital gains on wealthier taxpayers
- If Wyden succeeds in this endeavor, no Republicans will support this bill, and it will fail
- In the Senate:
- In the House:
- House lawmakers approved in June a $715 billion surface transportation bill (H.R. 3684)
- This is a spending bill and does not contain any tax measures
- Rep. Peter DeFazio (D-Ore.), who chairs the House Transportation and Infrastructure Committee, recently told reporters that a tax title could come later. It is not clear what he meant since the House has already passed the bill
- This is not the American Jobs Plan, according to House Democratic leaders
- They say this bill will be the basis for what they will use when conferring with the Senate and President Biden on their $1.2 trillion proposal
- House lawmakers approved in June a $715 billion surface transportation bill (H.R. 3684)
- Votes needed to pass if legislation for the American Jobs Plan is created:
- The House: a simple majority
- Can pass with only Democratic support
- No Republican support expected
- The Senate: at least 60 votes
- At least ten Senate Republicans must support this bill for it to pass
- It is not clear if there is enough Republican support to pass the bill
- The House: a simple majority
- Possible next steps:
- Assuming the Senate can pass its legislation for the American Jobs Plan, it will likely be different from what the House passed, i.e., the $547 billion surface transportation bill (H.R. 3684)
- Normally, these bills would immediately be conferenced to hash-out the differences between the bills
- Instead, a conference on legislation for the American Jobs Plan could be tabled so action can begin on the American Families Plan
Track Two:
- The American Families Plan:
- Congressional Democrats seek to move this bill through a process called “budget reconciliation”
- Democratic congressional leaders must first pass a budget before they can use budget reconciliation to move their American Families Plan
- Both chambers must agree on the same budget
- The Senate hopes to pass a budget this month
- It is unclear when the House will vote on a budget
- In the Senate:
- Senate Budget Chairman Bernie Sanders (I-Vt.) is preparing a budget that includes “reconciliation” instructions
- The instructions are expected to allow a bill costing $6 trillion with $2.4 trillion in tax increases
- Many of the tax provisions to be in Sanders’ plan were included in the Jobs and Families plans. They were explained in the Treasury’s Green Book and include:
- Raising the corporate income tax rate from 21% to 28%
- Taxing long-term capital gains and qualified dividends at ordinary income tax rates for taxpayers with adjusted gross income of more than $1 million
- Significantly modifying the taxation of the international activities of U.S.-owned businesses
- Limiting the amount of gain eligible for deferral under section 1031
- Repealing tax provisions benefiting the fossil fuel industry
- Providing additional tax incentives for renewable and alternative energy
- Transferring appreciated property by gift or on death would be taxed as realization events, subject to a $1 million per person exemption, effectively allowing stepped-up basis with respect to exempted property
- Ensuring that all trade or business income of taxpayers with adjusted gross income in excess of $400,000 would be subject to either the 3.8% Medicare tax or the 3.8% net investment income tax
- The Sanders proposal provides relief on the SALT deduction cap, but details have not been made public
- On the Spending side, this bill will address an array of issues, like childcare, elder care, day care as well as Medicare, climate and immigration matters
- Reconciliation rules may not permit some of these provisions being in the bill
- In the House:
- House Budget Chairman John Yarmuth (D-Ky.) will wait to release his budget proposal until the Senate passes its budget resolution
Possible next steps:
- After the House and Senate pass the same budget, committees in both chambers are expected to use the reconciliation instructions to write the legislative text for the American Families Plan
- The legislative process will require action from several committees and is expected to take a while
- Votes needed to pass if legislation for the American Families Plan is created:
- The House: a simple majority
- The Senate: a simple majority (51 votes)
- Budget reconciliation rule allow passage with a simple majority
- There are 50 Democratic Senators, so all of them need to support the bill
- Vice President Kamala Harris would be the 51st vote
Prospects for passage:
- Jobs Plan: Progressive Democrats in both chambers could oppose it
- They think its benefits are too narrowly focused, i.e., not enough aid to familes
- House: Can only lose four Democratic votes before it fails
- Senate: If Dem opposition is widespread, passage depends on GOP votes, which is dicey
- If this bill fails to pass, it could be rolled into the Families Plan
- They think its benefits are too narrowly focused, i.e., not enough aid to familes
- Families Plan: Moderate Democrats are not fond of the bill
- They say it spends too much and increases taxes
- No Republican from either chamber is expected to support it
- House: Can only lose four Democratic votes before it fails
- Senate: If one Democrat opposes it, it fails
- Since Biden released these plans, it seems less likely that they will be enacted into law. However, that could change. There is a saying on Capitol Hill that legislation is assumed to fail – until it passes. This could be true for Biden’s plans, but it is too early to tell
- The House and Senate are expected to vote on both bills in the fall