The Senate on Wednesday failed to move forward on a bipartisan infrastructure plan that is not completely written, but is not expected to increase taxes if it is finalized. The chamber is expected to revisit this legislation in the near future.
The vote was on a motion to begin debate on an infrastructure proposal that a bipartisan group of Senators have been trying to draft for weeks. The motion failed to garner the sixty votes needed to proceed. The tally was 49-51, which largely fell along party lines. The only Democrat to break ranks was Senate Majority Leader Chuck Schumer (D-NY), who had to oppose the legislation to be able to bring it up again.
Support from at least ten Senate Republicans was needed for the chamber to begin debating the bill. None of them supported the motion because the bill’s details have yet to be nailed down. Conservatives would like to see the bill’s text and its cost estimate before moving to debate it.
Senate Republicans and Democrats who have been working on the legislative text have said the final product should be ready next week. Once the plan is turned into legislation, it is expected to cost $1.2 trillion over eight years or $973 billion over five. Its cost can be calculated after its text is finalized. Shortly thereafter, the chamber could hold another vote on whether to debate the bill.
However, a finalized bill complete with cost estimate does not guarantee that ten Senate Republicans will support it. Advancing the bill could be viewed as a political win for Democrats, especially President Biden, who has been vocal about wanting to enact a bipartisan bill. Senate Republicans might oppose the bill as it could allow Democrats to take a victory lap.
If the Senate holds another vote on the infrastructure legislation and it too fails, Democratic leaders could roll the contents of the infrastructure plan into the much larger $3.2 trillion reconciliation bill that can pass both chambers with only Democratic support.
The reconciliation bill is expected to increase taxes on corporations and individuals with taxable income above $400,000 (more on tax increases below).
Possible Long Road Ahead:
Whether or not the bipartisan infrastructure bill is rolled into the reconciliation legislation, Congress has a lot of work to do before it can pass the reconciliation package and send it to the White House to be signed into law:
Throughout this process, amendments can be raised. Also, in the Senate, lawmakers can contend that certain provisions in the legislation fall outside reconciliation rules and should be struck from the bill. The parliamentarian vets these claims. All of this can be time-consuming.
It is expected that Congress will complete its work on the reconciliation bill in either September or October. It is not clear if this package will pass, as several moderate Democrats have grumbled about many of the provisions that are expected to be included in it.
No legislative text has been made public for the bipartisan infrastructure proposal or the reconciliation plan.
Possible Glitch to that Long Road:
This takes some explanation.
Senate Minority Leader Mitch McConnell (R-Ky) has said that no Senate Republican will vote to address the debt ceiling.
The debt ceiling is the amount of debt that the federal government can carry. Currently, it is suspended, which means the federal government can issue as much debt as it sees fit. However, that suspension will expire on July 31 – in basically a week and a half. After it expires, Congress has a limited window of time to address the debt ceiling. Treasury Secretary Janet Yellen estimated that Congress must act in August.
If McConnell stays true to his word, Democrats will have to address the debt ceiling in a legislative vehicle that can pass the Senate with a simple majority. A likely vehicle is the $3.2 trillion reconciliation bill that is expected to include tax increases.
Based upon Yellen’s estimate, Congress would not be able to wait until September or October to act on the reconciliation bill if a fix for the debt ceiling is a part of it. Instead, lawmakers would have to introduce legislation, put it through committees, and pass it next month. This means that effective date on tax increases could be earlier than expected.
August is also the month that lawmakers are largely at home. The House is currently scheduled to adjourn for the August break on July 30 and return on September 20. The Senate is scheduled to adjourn on August 6 and return on September 13. These plans will likely be changed if the debt ceiling is added to the reconciliation bill and it needs to move next month.
The Congressional Budget Office has also projected when Congress must act on the debt ceiling. It does not see action being necessary until October or November of this year. If it is correct, Congress would not need to act until the fall.
Regarding Tax Increases:
The tax provisions in the reconciliation bill are expected to come from President Joe Biden’s American Jobs Plan and American Families Plan, which the Treasury Department recently detailed, and could include:
Any tax increase could be phased-in over time. They also could be reduced or even eliminated to garner support from moderate Democrats, like Senator Joe Manchin (D-W.Va.).
The reconciliation legislation could also give a haircut to the pass-thru deduction by only allowing entities with less than $400,000 in taxable income to claim the deduction. The bill could also modify the SALT deduction cap by undoing it for taxpayers earning less than $400,000 in taxable income each year.
This is a roundup of tax news and opinion. Any opinions expressed or implied are those of the author and not necessarily those of Eide Bailly. Opinions found in linked items are those of the authors of the linked item, not of your bloggers or of Eide Bailly. “$” means link may be behind a paywall. Items here do not constitute tax advice.