Legislative Text Released for Tax and Spending Bill

October 28, 2021

House Democratic leaders on October 28th released the legislative text for the budget reconciliation bill that includes tax and spending increases. 

The bill (roughly 1,700 pages) was presented before the House Rules Committee, which is the panel charged with prepping legislation for a floor vote in that chamber.

However, Committee Chairman James McGovern (D-Mass.) said that his panel would not advance the bill to the floor today. He was also unclear on when his committee would act on the legislation. (It is believed that the text was publicly released largely because certain House Democrats refused to support the bill unless the legislation’s details were known.)

The legislation includes $1.85 trillion in spending and tax relief, and roughly $2 trillion in tax increases and other increases, according to the budget think tank Committee for a Responsible Federal Budget.

The legislative text of the bill largely follows the “framework” that the Biden Administration released this morning. However, Speaker Nancy Pelosi (D-Calif) said that the text could be changed as the legislation moves through Congress. (It has been suggested that relief from the SALT cap could be added.)

What Tax Increases are in the legislation:

The proposed tax increases follow what was included in the framework that the White House released this morning and was reported in today’s Eide Bailly Roundup. The following tax increases are included in the bill:

  • A 15% minimum tax on financial statement income on corporations with over $1 billion in profits.
  • A 1% surcharge on corporate stock buybacks.
  • A 15% GILTI rate with country-by-country computations, inflating the total tax on foreign operations.
  • A 5% surcharge on income over $10 million, with an additional 3% rate on incomes over $25 million 2025the 5% surcharge affects estates and trusts with modified adjust gross income at least $200,000 and the 3% charge hits these entities with $500,000 of modified AGI.)
  • Application of the 3.8% Net investment income to non-passive income.
  • Increased IRS spending.
  • Extension of Limit on Excess Business Losses for Noncorporate Taxpayers.

On the bright side, the legislation extends R&D expensing through 2025. This provision was set to expire at the end of this year. The bill also provides tax incentives for renewable energy.

Will this Bill Pass Congress?

It is not clear that the legislation will pass Congress.

No Republican in either chamber is expected to support the budget reconciliation package. Support for it will solely come from Democrats. This means that all Senate Democrats must support it and only three House Democrats can oppose it. Additional opposition and the bill will fail. Currently, not enough Democrats support its passage:

  • Senators Kyrsten Sinema (D-Ariz) and Joe Manchin (D-W.Va.) have made several changes to the bill but have yet to publicly announce that they support the legislation.
  • Senator Bernie Sanders (I-Vt) contends that more measures need to be added to the package.
  • At least 55 House Democrats have said they would withhold support for the budget reconciliation until they could read the bill’s text. Those details are now public, but there has been no announcement that it is enough to win their support for the legislation. A possible reason for their silence could be that Speaker Pelosi said the bill would likely change and they are concerned about a “bait and switch.”

Next Steps:

The budget reconciliation bill’s fate is tied to that of the Senate-passed infrastructure bill (despite efforts by Speaker Pelosi to undo the combination). This means that the passage of one bill is dependent upon the approval of the other.

Speaker Pelosi has pursued a House vote on the Senate-passed infrastructure bill multiple times. She has not been able to follow through in that effort because certain House Democrats have refused to support the bill until the budget reconciliation package was ready for passage.

As more details are added to the reconciliation bill, it seems more likely that the House will act on these two pieces of legislation when both are primed for passage.

However, if Pelosi succeeds in her pursuit to pass the infrastructure bill before the reconciliation bill is finalized, the fate of the latter bill becomes less clear.

The path to enactment for the reconciliation bill is long and possibly arduous. Assuming House passage, it must then be approved by the Senate, where its legislative text is likely to be changed. The chambers must agree on identical pieces of legislation to pass Congress and be signed into law. This process can be time consuming.

Upon passage in the House, the next step for the infrastructure bill is being signed into law by President Biden. This means the bill could become law immediately after its approval in the lower chamber.

The reconciliation bill has a much harder trek to the Oval Office.  

A section-by-section summary of the budget reconciliation bill is here.

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