As details continue to emerge regarding the substance of the tax increases contained in the Biden Administration's infrastructure package, attention is turning to the package's potential legislative path to enactment. The prospects for a bipartisan package are slim, as Republicans have not shown any receptivity to the significant tax increases being proposed by the Administration. Moving the package through the budget reconciliation process will also present challenges, as in order to secure support of virtually all House Democrats and all Senate Democrats (with Vice President Harris casting the tie-breaking vote in the Senate), agreement will need to be reached on the overall size and content of the infrastructure spending package, the scope of the offsetting tax increases (with Senator Manchin (D-WV) recently indicating he would only be receptive to a corporate tax increase to 25 percent, rather than 28 percent), and the potential inclusion of a repeal of the controversial $10,000 state and local tax (SALT) deduction cap.

In order to address some of these challenges, a number of "two bill" strategies have been suggested, although these strategies may prove to be more theoretical than practical. Facilitated by a recent ruling by the Senate Parliamentarian that the 2021 budget resolution can be amended to potentially provide an additional reconciliation vehicle, it has been suggested that Democrats pursue two reconciliation vehicles – the first pairing traditional infrastructure spending (i.e., roads and bridges) with business tax increases and the second pairing so-called "social" infrastructure spending (i.e., health care and child care) with individual tax increases on the wealthy. It is unclear, however, whether Democrats would want to be on record voting on two separate bills with significant tax increases in advance of the 2022 midterm elections. Alternatively, it has been suggested that Republicans may support a smaller infrastructure package without any offsets (i.e., no tax increases), with a subsequent infrastructure package funded by tax increases moving through the reconciliation process. It is similarly unclear whether Republicans would be receptive to such a package, particularly if it is viewed as a mechanism to facilitate the subsequent reconciliation package with tax increases.

The uncertainties regarding the scope of the infrastructure spending package and the potential offsetting tax increases, combined with the political dynamics, suggests to us that ultimately a single budget reconciliation package, perhaps timed to the expiration of government funding and highway authorization on September 30, 2021, represents the "path of least resistance" to enacting this legislation – which is a top priority item for the Administration and Congressional Democrats. #TaxTake

Upcoming Speaking Engagements and Events

Jorge and Loren will deliver a 2021 Tax Policy Update in a webinar sponsored by the National Association of Black Accountants (NABA) and TEI Chicago on April 20. 

On April 20, Loren will present Perspectives on Tax Policy and Closing the Wealth Gap at the Perspectives on Minority Business Development Symposium.

Jorge will present a Tax Legislative Update to the Tax Executives Institute's Denver Chapter on April 21.

Loren will participate in a panel discussion on President Biden's proposed global minimum tax during the Washington International Trade Association's webinar, Global Minimum Tax, on April 29.  

On May 12, Loren will present Overlay of Potential International Tax Reform and OECD Pillars I and II, a panel discussion at the ABA Virtual 2021 May Tax Meeting.

In The News

Marc discussed the prospects of bipartisan tax legislation in Law360. "After several bipartisan COVID relief packages, the fact that the latest package had to be enacted on a Democrat-only basis through reconciliation is an ominous harbinger of the difficulty of moving bipartisan tax legislation in this Congress," Marc said.

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