State of Play for Build Back Better: Murky

February 18, 2022

A Senate Democrat spoke to a D.C. audience on February 17th who specialize in tax policy. The conversation was off-the-record. Because of this, the Senator and the organization that sponsored the event are not named in the article.  


A senior Democratic Senator on the tax-writing Senate Finance Committee offered a somewhat bleak assessment on Congress eventually passing the tax and spending reconciliation bill referred to as Build Back Better.

“We’re on pause. We’re on hold. There is nothing immediately going on,” he told a D.C. audience of tax professionals.

Progress on the legislation came to a screeching halt shortly after the House passed the bill when Senator Joe Manchin (D-W.Va.) said he could not support the legislation as currently written. Later, Manchin then went a step further and said that any changes to the legislation should go through committee, which would require Republican support to pass – and no conservative lawmaker in either chamber supports the bill.

Since Manchin’s moves, the Senator is not sure if momentum will gather to pass the legislation from his chamber.

“I hope we can get that to the finish line…but there is no guarantee,” he said, adding “I wouldn’t want to guarantee that we have 50 members that under the right circumstances will vote for a reconciliation bill.”

The tax and spending reconciliation bill has been structured to pass with only Democratic support. In the upper chamber that means passage relies on the support of all 50 Senate Democrats along with the Vice President. But that level of support has yet to materialize, according to the Senator.

“At this particular moment, we don’t have consensus on the Democratic side… It’s just not there,” he said, adding that some Democratic Senators have changed their positions on Build Back Better, making it harder to know where support stands for the legislation.

“What they say one day they change their minds the next day. It’s really difficult for us to pen them down,” he said.

The Senator did not name the lawmakers he was referring to. 

No Agreement on Taxes

News outlets have reported there is consensus around the tax provisions in the Build Back Better bill. The Senator said those reports are not accurate.

“Some that might consider a minor disagreement is major to someone else I can assure you,” he said, adding, "until we have an agreement, we don't have an agreement."

Democratic members on the Finance Committee are fielding complaints and questions from fellow Senators about the tax increases included in the House-passed Build Back Better bill. A chief concern is that the corporate minimum tax could run afoul of what the OECD does – and Senators aren’t confident how to address the issue.

“We aren’t exactly sure how the international regime proposal would affect [domestic] tax credits… We’re not yet fluent enough in the impact to reach a judgement,” he said, suggesting that the answer might be out of reach.

“They don’t pay me enough money to really understand as well as I need to,” he said

Some Senators contend the corporate minimum tax proposal should not be in the bill until it is clear what the OECD will do on the issue.

The book tax and SALT cap deduction are also unresolved issues, to name a few.

“There is a lot of anxiety over a lot of these provisions,” the Senator said.

However, the legislation is getting smaller. This means that fewer tax increases will be needed to offset the cost of the bill, the Senator said.

“The package is getting smaller; therefore, we can eliminate some of the more controversial offsets [tax increases],” he said.

The Senator did not specify which tax increases would be the first on the chopping block.

He also cautioned against Senator Manchin taking the helm in crafting the legislation, which has been widely reported.

“The fact that one Senator, on the Democratic side, can write the bill, [that] could really cause some significant policy challenges,” he said.

Spending Bill Priority Over BBB

Since the New Year, determining Senate support for the tax and spending reconciliation bill has become less of a priority. The Senate is now focused on passing a spending bill that funds the federal government through the fiscal year-end, September 30th.

"I do think we're going to try and get the omnibus done first before we can get to the Build Back Better agenda," he said.

Lawmakers have until March 11th to reach an agreement on the spending package and some tax provisions from Build Back Better bill might hitch a ride on the legislation, according to the Senator.

“I think we might see some tax issues in the omnibus [the spending bill],” he said, adding that fixing the R&D amortizaton problem is a top contender for spending bill.

"That issue has been raised in regards to the omnibus," he said.  

Energy-related tax credits or economic tax incentives could also be added to the bill.

Additionally, the Senator said that another COVID-19 relief bill is being discussed. It also could include tax provisions from the Build Back Better bill.

“There could be some rapidly developing proposals to deal with affordability of American families in light of inflation. That issue goes everywhere from tax holidays to expanding tax credits,” he said, adding that “we’re in the early stages in those discussions.”

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