Tax Update Blog

House approves procedural vote that puts Biden economic agenda in motion

August 24, 2021 | Blog
By Jay Heflin

After enduring a false start on Monday, the House of Representatives on Tuesday approved a procedural vote that allows the chamber to move forward on three pieces of legislation:

  • A budget resolution allowing lawmakers to ultimately craft a $3.5 trillion bill that increases taxes and spending;
  • The $1.2 trillion Bipartisan Infrastructure Bill that was approved by the Senate;
  • The John Lewis Voting Rights Act that amends the Voting Rights Act of 1965.

Today's vote does a few things: 

  • It deems that the budget was adopted by the House. This means that when the House approved the procedural motion it also adopted the budget (so no second vote to pass the budget is required). The Senate and House have now approved the same budget, which clears the way for congressional committees to publicly vet the $3.5 trillion tax and spending bill; 
  • It sets the rules for separate floor debates on the $1.2 trillion Bipartisan Infrastructure Bill and the John Lewis Voting Rights Act.

The fight over the $1.2 trillion Bipartisan Infrastructure Bill:

House Speaker Nancy Pelosi (D-Calif) and moderate House Democrats argued for weeks over when to vote on the $1.2 trillion Bipartisan Infrastructure Bill. 

Speaker Pelosi wanted to postpone the vote on the infrastructure bill until the $3.5 trillion tax and spending bill was approved by the Senate, which could be in the fall. 

Moderate House Democrats, however, wanted the vote on the infrastructure bill to be as soon as possible, and not wait for the Senate to pass the $3.5 trillion tax and spending bill. 

In a nod to moderate Democrats, Speaker Pelosi agreed to hold a floor vote on the $1.2 trillion Bipartisan Infrastructure Bill by September 27th regardless of when a vote occurs on the $3.5 trillion tax and spending bill. This agreement converted Democrats opposing the legislation into supporters of it.

It is unclear how progressive House Democrats will react to this agreement. They wanted a vote on the infrastructure bill and the $3.5 trillion tax and spending bill to happen at roughly the same time. That goal may no longer be reachable. 

The $1.2 trillion Bipartisan Infrastructure Bill could be signed into law immediately. The $3.5 trillion tax and spending bill, on the other hand, will take weeks if not months to complete. It must first pass several congressional committees and then be approved by the Senate parliamentarian before it can pass both chambers of Congress and be presented for a presidential signature at the White House.

House Majority Leader Steny Hoyer (D-Md) has designated that the first two weeks of September will be “committee work weeks” to complete the reconciliation bill. But it is not clear if the reconciliation process can be completed during Hoyer's timeframe.

House lawmakers aren't scheduled to return to Washington until September 20. A big reason for this is because two Jewish holidays occur during the first two full-weeks of September. It will be difficult for lawmakers to hold hearings during this period. 

A wrinkle regarding the $3.5 trillion tax and spending bill:

Sen. Kyrsten Sinema (D-Ariz.) said she will oppose the $3.5 trillion tax and spending bill because it is too expensive. If she stays true to her word, the bill will not pass the Senate (passage in the upper chamber requires all Senate Democrats to support the bill). 

If the $3.5 trillion tax and spending bill doesn’t pass the Senate then the fate of the $1.2 trillion Bipartisan Infrastructure Bill hangs in the balance.

Progressive House Democrats have threatened to oppose the infrastructure bill if they don't get to vote on the $3.5 trillion tax and spending bill. If they keep their word, passage of the $1.2 trillion Bipartisan Infrastructure Bill will rely on Republican support, which could happen.

What is currently unknown is if Sen. Sinema will agree to a lower-priced tax and spending bill. If she does, that could mean fewer tax increases in the final package. However, at this point, nothing is confirmed on what will pass both chambers, or what tax provisions will be included in the bill.

That being said, Rep. Katherine Clark (D-Mass), the assistant to the House Speaker, suggested on Tuesday that her party might be open to passing a tax and spending bill with a price tag lower than $3.5 trillion. 

“We are going to negotiate. This [$3.5 trillion] is a starting line,” she told CNN.

Bill Breakdown:

Below is a breakdown of the Bipartisan Infrastructure Bill and the budget instructions regarding the $3.5 trillion tax and spending bill.

The $1.2 trillion Bipartisan Infrastructure Bill:

The Senate has approved this bill. If the House approves the legislation without changing it, the bill can be signed into law by President Joe Biden. If the House makes changes to the bill, those modifications must be approved by the Senate before it can be signed into law.

Most provisions included in the legislation relate to direct spending by the Federal government, but there are several tax-related provisions (that do not raise individual or corporate tax rates) noted below:

  • Revival of Superfund taxes:  Prior to 1996, a tax of 9.7 cents per barrel of crude oil, and equivalent taxes on certain chemicals, was collected on their sale to fund the cleanup of Superfund sites.  The Bipartisan Infrastructure Bill would restore the superfund tax with respect to most chemicals that were previously subject to the tax.  The tax is NOT restored with respect to crude oil.
  • Cryptocurrency reporting:  The proposed legislation would treat digital currency the same as cash for required reporting of payments in excess of $10,000, clarify that digital currency is a “covered security” for broker-to-broker reporting, and make other changes.
  • Modification to the Employee Retention Tax Credit (ERTC): The Bipartisan Infrastructure Bill sunsets ERTC after September 30, 2021, instead of December 31, 2021, as originally written. However, startup businesses that began operations after February 15, 2020, and had annual gross receipts of less than $1 million, are exempt from this provision. For these entities, ERTC expiration remains December 31, 2021.
  • Extending the period for filing a petition with the Tax Court.
    • When the Tax Court is inaccessible, the legislation provides for an additional 14 days after the Tax Court reopens to file a petition.
    • This provision is related to all closures, not just those caused by COVID-19.
  • Extends the IRS tax filing deadlines in Fire Management Assistance areas after significant fires.
    • The provision gives victims of significant fires the ability to postpone certain tax deadlines, like the postponement available to those affected by Presidentially declared disaster or terroristic or military actions.

The $3.5 trillion tax and spending bill:

This bill stems from the budget resolution, which has passed both chambers.

The budget does not get signed into law. Instead, it instructs the committees on how to create legislation that could get signed into law.

For example, the budget directs the tax-writing Senate Finance Committee and the House Ways and Means Committee to “reduce the deficit by not less than $1,000,000,000 for the period of fiscal years 2022 through 2031.”

It also provides guidance to the tax-writing committees on where to raise revenue:

  • Corporate and international tax reform;
  • Tax fairness for high-income individuals;
  • IRS tax enforcement;
  • Health care savings;
  • Carbon Polluter Import Fee.

Further, it directs the Senate Finance Committee to make the following “investments” that are within its jurisdiction:

  • Paid Family and Medical Leave;
  • ACA expansion extension and filling the Medicaid Coverage Gap;
  • Expanding Medicare to include dental, vision, hearing benefits and lowering the eligibility age;
  • Addressing health care provider shortages (Graduate Medical Education);
  • Child Tax Credit/EITC/CDCTC extension;
  • Long-term care for seniors and persons with disabilities (HCBS);
  • Clean energy, manufacturing, and transportation tax incentives;
  • Pro-worker incentives and worker support;
  • Health equity (maternal, behavioral, and racial justice health investments);
  • Housing incentives;
  • SALT cap relief

Lastly, the budget stipulates that tax increases should not fall on people earning less the $400,000 a year, small businesses or family farms.

It will be up to the tax-writing committees on what tax provisions will be included in the bill. Details on those provisions are expected to be released this fall.

The House Ways and Means Committee is expected to begin publicly working on the bill the week of September 6. 

 


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