TAX TAKE: Let's Go: What Happens if Schumer/Manchin Agree on a BBBA Deal?
With Build Back Better Act (BBBA) negotiations on hold during the Congressional July 4 recess, speculation continues as to whether Senate Majority Leader Chuck Schumer (D-NY) and Senator Joe Manchin (D-WV) can ultimately strike a deal on a slimmed-down bill that would include spending priorities and deficit reduction, with the tax increases to pay for both. Let's take a look at what needs to happen if, in fact, an agreement on BBBA is ultimately reached.
Get Senator Sinema on Board. The first order of business is to secure Senator Kyrsten Sinema's (D-AZ) approval of the spending, deficit reduction, and, perhaps most importantly, tax increases in the bill. Sinema's substantial influence erased rate increases in the House bill last year, and it's anticipated she will seek further changes to the proposed 15 percent corporate book income minimum tax and the proposed surtax on high-income individuals, as well as other provisions.
Hold the Democratic Caucus. With the narrowest of majorities in both the House and Senate, Congressional leadership and the White House will need to ensure that all Democrats support the bill. House progressives will need to relinquish their goal of enacting significant social spending programs and House moderates may need to forego relief from the state and local tax (SALT) deduction limitation. All Democrats will need to be comfortable with using tax increases to fund not only spending programs, but also significant deficit reduction.
Get the Bill Drafted and Scored. The House and Senate Offices of the Legislative Counsel will need to draft legislative language for the new bill, which the Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) will then need to score. Although the work done on the House-passed version of the BBBA can be updated to reflect legislative changes more quickly than starting from scratch, the drafting and scoring process to incorporate adjustments will take time.
Take a Byrd Bath. Congressional Democratic Leadership will need to work with the Senate Budget Committee and the Senate Parliamentarian to ensure the bill complies with the budget reconciliation rules (i.e., that all provisions of the bill directly impact government spending or taxes, to the exclusion of non-germane policy items), as well as fend off potential procedural challenges from Senate Republicans.
Prepare for a Grueling Vote-A-Rama in the Senate. Because it's a reconciliation measure, the time for debate on a slimmed-down BBBA is limited, but the number of amendments is not. We're anticipating that Senate Republicans will force Senate Democrats to take many difficult votes given the pending mid-term elections – look for Republicans to push Democrats to vote against repurposing deficit reduction funds for popular social spending programs or tax relief, as well as tough votes on fighting inflation and whether to encourage more domestic energy production from fossil fuels.
Make Sure the Bill Remains Politically Viable. Congressional Democratic leadership and the White House will be keenly focused on the continued political viability of BBBA in a volatile economic and political environment, particularly as the mid-term elections draw closer. They will undoubtedly be focused on the receptivity of the American public to a large "tax and spend" bill in light of concerns regarding inflation, rising gas prices, the repeal of Roe v. Wade, recent incidents of gun violence, and other issues.
Watch the Clock. The process described above will take, at minimum, about a month. Congressional Democratic leadership and the White House will not only have to negotiate around the September 30 expiration of the underlying budget resolution but also the month-long August Congressional recess, and the bill gets harder to pass with each day as the mid-term elections get closer.
Even if Senators Schumer and Manchin do strike a deal, Congress and the White House will still face a number of procedural and political minefields in a condensed period of time in order to get the bill across the finish line. But let's first see if there is a deal to be had! #TaxTake
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