TAX TAKE: Don't You Let That Deal Go Down – Top 10 Questions Regarding Senator Manchin's "Slimmed Down" BBBA Proposal (Part Two)
As Congressional Democrats continue to consider Senator Joe Manchin's (D-WV) recent comments on a potential path forward to salvage priority items in the Build Back Better Act (BBBA), and with House Democratic Leadership seemingly intent to pass some version of the legislation again this year, we bring you Part 2 of our top 10 questions regarding Senator Manchin's slimmed down BBBA proposal:
- What is the current mood in Congress for engaging Senator Manchin on a potential BBBA deal? As reflected by Senate Majority Whip Dick Durbin (D-IL), there is general frustration among Democrats as they grapple with how best to engage with Senator Manchin on his changing positions on the BBBA. That said, there does seem to be a willingness by Democrats to try to find a path forward on the BBBA items where agreement can be found, especially if the package can reduce the deficit to appease Senator Manchin. As long as these lines of communication remain open, lawmakers will continue to try to find a compromise in the coming months.
- When could a slimmed down BBBA potentially be considered? Congress, particularly the Senate, will be focused on other priority items for the next couple of months. The Senate is currently considering the Supreme Court nomination of Judge Ketanji Brown Jackson, with the Senate Judiciary Committee beginning her confirmation hearings this week and the White House aiming for Judge Jackson to be confirmed by mid-April. The confirmation will be a focus for Senate Democratic leadership until then. Also, after Ukrainian President Volodymyr Zelenskyy's impassioned speech to Congress last week, lawmakers will likely consider additional military and humanitarian aid for Ukraine, as well as additional sanctions on Russia. This week, the Senate will vote on the House-passed America COMPETES Act, then both chambers will head in to conference to reconcile it with the United States Innovation and Competition Act (USICA), the Senate's own version of an innovation and China competition bill. All that is to say, Congress will be busy for the next few months, so the earliest a slimmed down BBBA could be considered is around late spring/early summer – at best.
- What is the deadline for enacting any version of BBBA? Assuming a compromise on any version of BBBA is attainable and that Congress won't start considering a package until late spring/early summer, what is the deadline for enactment? There are two key points to consider. First, recess. The Fourth of July and August recesses are sacred in Congress, especially this year as members want to be back in their districts and states campaigning for re-election. If Congressional Democrats get any traction at all on BBBA, look for those dates to be potential backstops. Second, September 30. That is when the current budget fiscal year expires, hence when the budget reconciliation instructions by which Democrats hope to pass BBBA also expire. Thus, every upcoming Congressional recess presents a potential forced deadline, with the ultimate deadline being September 30.
- Will Congress look beyond the House-passed revenue raisers to fund the package? The House-passed BBBA bill includes revenue raisers totaling about $1.5 trillion. The House package raises revenue without raising individual or corporate rates, which was a non-starter for Senator Kyrsten Sinema (D-AZ). The revenue raisers also did not receive any considerable objections from Senator Manchin. This signals that both key Senators gave tacit support for these revenue raisers, at least at the time the House was considering BBBA. Whether those views have changed since the House passage, however, is yet to be seen, although there are indications that Senator Sinema may be pursuing changes to the corporate book income minimum tax among other provisions. Nevertheless, if Democratic leadership can find a path forward on a compromise for a trimmer version of BBBA, we expect Congress to start with the House-passed tax proposals to offset the spending provisions.
We should also note President Biden is expected to release his FY 2023 budget soon, which will be accompanied by the Treasury Greenbook and a new set of tax proposals for lawmakers to consider. Should Congress need to look beyond the House-passed list of tax raisers, look for the Greenbook to potentially include options for lawmakers. Tax Take readers should review the Greenbook proposals carefully as they will receive attention by the House and Senate tax-writing committees.
- And what about House progressives? While there has been a lot of attention on Senator Manchin holding the keys to the future of BBBA, members of Democratic leadership, particularly Speaker Nancy Pelosi (D-CA), are going to have to balance the interests of House progressives, who have advocated for a robust social spending package. Congresswoman Pramila Jayapal (D-WA), Chair of the Congressional Progressive Caucus, has expressed openness to discussions with Senator Manchin, signaling progressives could be willing to negotiate on a scaled-back BBBA.
In summary, in the near-term, Congress will be focused on the Supreme Court nomination of Judge Ketanji Brown Jackson and the need to address the war in Ukraine. However, there continues to be strong interest by Democratic leadership in finding a way forward for BBBA, even if it's significantly pared down. As long as that's on the table and Senator Manchin continues to issue potential alternatives, revenue raisers will be on the menu (especially those in the House-passed BBBA). Stay tuned. #TaxTake
Upcoming Speaking Engagements and Events
On April 26, Marc will moderate a panel titled "Retirement Policy's Path Ahead: 2022 Legislative Outlook," at the ERIC Spring 2022 Virtual Policy Conference.
Marc will present "Federal Tax Policy Update," at the Manufacturers Alliance Tax Council Spring Meeting on May 19.
In the News
Marc recently appeared on the Talking Tax in a Truck podcast to discuss the potential slimmed down BBBA.
Loren appeared on the GILTI Conscience podcast this week to talk about the art of drafting and passing tax legislation.
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