What’s Going On in Washington?
The infrastructure bill and spending bill have been held up in limbo for weeks. The $1 trillion infrastructure bill has already been passed in the Senate but initially the hang up was that the House wouldn’t proceed with a vote on it without a spending bill. Many other hurdles have come up as the spending bill was developed on proposals.
The spending bill as part of the reconciliation process only needs 51 votes to pass in the Senate. Democrats have 51 votes with Vice President Kamala Harris holding the tie-breaking vote but every single Democratic Senator would need to be on board. Senator Joe Manchin (D-WV), has pushed for a lower dollar amount on the spending bill. The initial proposal called for $3.5 trillion. In order to get his vote it appears that could take getting the bill down a size somewhere between $1.5 and $2 trillion. That would obviously mean several items would need to be cut from the proposed bill. Items reportedly scrapped from a final bill or significantly changed include:
- Free community college.
- A permanent expanded Child Tax Credit would instead revert back to a reduced amount after a certain number of years.
- Expanded Medicare coverage to include dental, vision and hearing.
- Senator Manchin has stated he doesn’t support any expansion of Medicare programs.
- Paid family and medical leave.
- 12 weeks of paid family and medical leave could be scaled back to 4 weeks for low-income workers.
In addition to Senator Manchin, Senator Kyrsten Sinema (D-AZ) is a holdout for various reasons. Senator Sinema played a key roll in the infrastructure bill and wants to see it passed without tying it to the passage of a spending bill. She has also taken issue with the size of the spending bill and is reportedly against raising tax rates. Without raising tax rates the bill would need to be more creative in raising tax revenue. For example, the net investment income tax (NIIT) currently does not apply to active trade or business income. By subjecting passive and active trade or businesses to the NIIT based on income, tax revenue would certainly go up without technically raising the tax rate. Other potential issues in the spending bill with Senator Sinema include the proposed bill allowing Medicare to negotiate drug prices and sufficient attention to addressing climate change.
President Biden and Democratic leaders have expressed confidence that voting will proceed very soon on both bills with a spending bill revised to ensure they have the votes to pass it.
Nathan is a CPA and has more than ten years of experience providing tax planning, consulting and compliance services to a number of privately held businesses and individuals in a variety of industries, with a special focus on the transportation and logistics industry. He actively communicates with clients and seeks ways to align their individual and business goals with available tax strategies to allow them to make well-informed decisions.
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