Democratic Patience Wearing Thin. Negotiations around the bipartisan infrastructure framework and the partisan budget reconciliation package continue, but little progress appears to have been made in recent weeks.
Congressional Democrats and the Biden administration are still grappling over how to reduce the size of the Build Back Better Act from $3.5 trillion to around $2 trillion to align more closely with demands from more centrist Democrats while not alienating progressives. However, disagreement over how to do that remains, with the debate revolving around whether to decrease the number of programs or keep more programs for a shorter period of time to dramatically reduce the topline number.
Amid the stalemate, there is a growing sense of urgency within Congress and from the White House on the need to demonstrate progress. President Biden recently told reporters there is no deadline for agreement on the Build Back Better Act, but a source close to the White House released a statement last week saying the administration “feels that serious progress has been made and that members representing each viewpoint are operating in good faith, but that the time for negotiations is nearing an end.”
Additionally, Senate Majority Leader Chuck Schumer (D-NY) is attempting to spur Democratic members to action. He sent a letter last week advocating for unity as Democrats attempt to advance the Biden administration’s economic agenda, urging Democrats to “put aside our differences” and “find common ground.”
In the coming weeks, pressure for a deal with continue to build. With a gubernatorial election quickly approaching in Virginia, Democrats want to give Terry McAuliffe a boost. Virginia is widely viewed as a litmus test for the 2022 midterms.
Manchinema Check-In. Sens. Joe Manchin (D-WV) and Kyrsten Sinema (D-AZ) continue to be the key to successfully negotiating a deal on budget reconciliation. Below is a recap of where both influential members stand on various issues:
Most recently, Manchin has placed more specific demands related to the expansion of the Child Tax Credit (CTC). He recently told the White House that any expansion must include work requirements and a family income cap around $60,000. Manchin’s proposed changes would reduce the overall price tag of the package, but it would also not sit well with progressive Democrats who have prioritized the expanded CTC. In response, White House Press Secretary Jen Psaki said Monday that President Biden would entertain income restrictions and means testing for the CTC.
Manchin is also reportedly interested in the Biden administration’s plan to subsidize day care and offer free universal preschool. Like the CTC proposal, however, Manchin would also want to impose income caps on the pre-K subsidies.
Finally, he is reportedly less enthusiastic about the paid family leave proposal and the new program for elder care floated by the administration.
Sinema has recently said she will not vote for the Build Back Better Act until the House passes the Infrastructure Investment and Jobs Act. She has also not officially signed off on the $1.9 trillion to $2.2 trillion overall price being targeted by Democratic lawmakers and the White House. Reports indicate that the senator and her staff continue to be engaged in detailed discussions on policy.
House Democrats Advocate for ERTC. In a letter to Speaker Nancy Pelosi (D-CA) on Thursday, Oct. 14, 17 House Democrats—including House Ways and Means Committee members Reps. Stephanie Murphy (D-FL) and Jimmy Panetta (D-CA)—emphasized the need to support the Employee Retention Tax Credit (ERTC) through the remainder of the year.
After extolling the benefits of the ERTC, such as its refundable nature, which ensures small businesses receive the benefit more quickly than income tax credits, and its advance payment structure, the letter explained how the ERTC was expanded in the Consolidated Appropriations Act and the American Rescue Plan Act to $7,000 per quarter in 2021. This, the letter said, has been a crucial lifeline for small businesses. With the Delta variant continuing to impose burdens on many employers, the lawmakers ultimately asked Pelosi to “ensure the ERTC remains in place for the remainder of this calendar year.”
The ERTC was repealed for the fourth quarter of this year in the Senate-passed bipartisan infrastructure bill. Democrats on the ERTC letter hope to remove this provision in the House version of the bipartisan infrastructure bill or to have it reinstated through budget reconciliation.
Bank Reporting Proposal Continues to Evolve. The Biden administration, as part of its tax compliance agenda, initially proposed an information reporting proposal that would require financial institutions to report information to the IRS about taxpayers’ inflows and outflows. While the original transaction threshold was set at $600, that has since increased to $10,000 following discussions between congressional Democrats and the administration.
House Ways and Means Committee Chair Richard Neal (D-MA) initially left the proposal out of the committee’s portion of the Build Back Better Act but, following negotiations with the administration, appears to be exploring options to attach the provision to the broader package. Speaker Nancy Pelosi (D-CA) reinforced this last week when she said the reporting requirements will be in the reconciliation package, adding that “if people are breaking the law and not paying their taxes, one way to track them is through the banking measure.”
Treasury Secretary Janet Yellen issued a fact sheet earlier today that provided more information about the proposal. She explained that “financial institutions and banks will add just two additional numbers to the information that they already supply to taxpayers and the IRS: the total amount of funds deposited into the account and the total amount withdrawn over the course of a year.” The fact sheet clarified that “the IRS will have no ability to track individual transactions,” combatting some of the claims presented by detractors of the proposal.
Following the release, Sens. Ron Wyden (D-OR) and Elizabeth Warren (D-MA) provided more details during a background call with reporters. They revealed that, in addition to including a higher transaction threshold of potentially $10,000, the plan will exempt bank account deposits from payroll-processing companies and federal benefit programs like Social Security. The changes are meant to focus the new requirements on high-income earners.
Policy and Taxation Group is your voice in Washington on economic freedom. We advocate for policies that allow American families to fully enjoy the economic liberties and benefits of a robust free market unique to our nation. For over 25 years, we have been the loudest voice in the nation’s capital on eliminating the death tax. This ill-conceived tax has a destructive impact on families, family businesses, job creation, and the national economy.
@FamilyEnterpriseUSA @PolicyAndTaxationGroup @DitchTheEstateTax #FamilyBusiness #Business #SmallBiz #EstateTax #Deathtax #CapitalGainsTax #StepUpInBasis #Taxes #gifttax #Generationskippingtax #InheritanceTax #repealestatetax #promotefamilybusinesses #taxLegislation #AdvocatingForFamilyBusinesses #incometax #Generationallyowned #Multigenerationalbusiness