TAX TAKE: Talking About a Resolution
There was significant progress in advancing the Democratic legislative agenda as the Senate passed (i) the Infrastructure Investment and Jobs Act, by a bipartisan vote of 69-30 (the "bipartisan infrastructure bill") and (ii) a FY 2022 budget resolution on a party-line vote of 50-49. The House of Representatives will come back from recess the week of August 23 to consider the budget resolution, although a group of moderate Democrats are threatening to vote against the resolution in light of Speaker Pelosi's decision to not also consider the bipartisan infrastructure bill.
Assuming the House ultimately approves it, the budget resolution sets the framework for consideration of the much-anticipated reconciliation bill. Most importantly, the budget resolution provides for the use of budget reconciliation procedures to advance legislation by a simple majority vote (i.e., Democratic-only vote) in the Senate. The budget resolution calls for up to $3.5 trillion in new spending – of that amount, it allows for a deficit increase of up to $1.75 trillion, with the other $1.75 trillion raised primarily through tax increases. It is important to note that some moderate Democrats have already indicated that they will seek to reduce the top line $3.5 trillion spending cap – any reduction in the cap will also likely result in a reduction of the amount of needed tax increases. The budget resolution does not identify specific tax increase proposals but a summary accompanying the resolution notes that possible offsets that may be considered include "corporate and international tax reform." The Treasury Department Greenbook proposals will likely form the base of the "reform" proposals that will be considered, although other proposals (including recent proposals advanced by Senate Finance Committee Chairman Wyden on carried interest and derivatives) may also be deliberated.
Although the budget resolution contains a non-binding deadline of September 15, 2021 for the committees of jurisdiction to provide their legislative recommendations to the Budget Committee, it is anticipated that the development of the reconciliation bill will actually take several months. While there are other legislative priorities that provide potential action dates for the reconciliation bill (such as the need to fund the government by September 30 and the need to address the debt limit sometime in the fall), it is unlikely that a reconciliation bill will be ready for consideration when Congress needs to act on these other priorities. Thus, it is likely that the reconciliation bill debate goes deep into the fall, with the only real deadline being the end of the calendar year, as Democrats will be very reluctant to enact legislation that significantly increases the deficit and/or increases taxes in the mid-term election year. #TaxTake
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In CQ Roll Call, Jorge said Democrats' $3.5 trillion budget reconciliation package or an end-of-year tax package could provide a vehicle for Congress to amend the cryptocurrency language in the coming months. He noted that as it stands, the Treasury Department and the IRS could have room to interpret the provision favorably.
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