Update: The House of Representatives passed the infrastructure bill late on Friday night. The legislation can now be signed into law, which President Joe Biden said he will do. However, the President has yet to give a timeline for when the bill will be enacted, only saying on Saturday that it would happen “soon.”
The House late on Friday also cleared a procedural vote for the budget reconciliation bill. This bill includes tax increases on corporations and individuals. A final vote on passage for the legislation is not expected for a few weeks, and it is currently unclear if this bill will pass Congress.
House Democratic leaders have announced a vote on the budget reconciliation bill and the Senate-passed infrastructure bill for November 5th.
The announcement came after the House Rules Committee late last night advanced the budget reconciliation bill to the chamber’s floor for consideration.
Votes on either bill have yet to occur. There are reports that some House Democrats do not want to vote on these pieces of legislation until they know the cost of the budget reconciliation bill. This cost estimate is not expected to be completed for at least two weeks, and possibly after Thanksgiving. If these opposing Democrats are successful, neither bill will get a House vote until the cost estimate is released.
It is not clear when the House will act on these bills, but when it does (and assuming they pass) the two pieces legislation will take divergent paths. The infrastructure bill could be signed into law while the reconciliation bill needs Senate approval before it can become law.
Below is the current state for where the bills stand.
The budget reconciliation bill:
The budget reconciliation bill has been a troubled piece of legislation since its inception. Only Democrats are expected to support it and will take nearly all of them to pass it from Congress. However, the party is divided on what provisions should be included in the bill and whether they should know the cost of the legislation before voting on it. These divisions appear to be wider than they were when negotiations started on the bill last spring.
Despite the intra-party divisions over the bill, the House Rules Committee on November 4th approved a budget reconciliation bill that includes the following tax provisions:
- Cap deductions for State and Local Taxes at $80,000 (2021 thru 2030).
- Above-the-line deduction of up to $250 for employee uniforms.
- Increase the research credit against payroll tax for small businesses.
- Tax on e-cigarettes.
- Disallow excess business losses (i.e., net business deductions in excess of business income) for noncorporate taxpayers. (Disallowed losses can be carried forward.)
- Reinstate the Superfund tax on crude oil and imported petroleum.
- Delay the requirement to amortize R&D expenses by five years.
- Renewable energy tax incentives.
- 15% minimum tax on financial statement income on corporations with over $1 billion in profits.
- 1% surcharge on corporate stock buybacks.
- 15% GILTI rate with country-by-country computations, inflating the total tax on foreign operations.
- 5% surcharge on modified adjusted gross income (MAGI) over $10 million, with an additional 3% rate on MAGIs over $25 million.
- Application of the 3.8% Net investment income to non-passive income.
- Increased IRS spending.
Upon House approval, the legislation would travel to the Senate where lawmakers in that chamber are expected to make changes to it.
One of those changes is expected to be on the State and Local Tax (SALT) deduction. Senators Bernie Sanders (I-Vt.) and Bob Menendez (D-N.J.) have said they will amend the provision by keeping the $10,000 cap for taxpayers with taxable income above $400,000.
Other Senators are expected to make non-tax changes to the bill. Possible change could be on immigration, prescription drugs, paid family leave, to name a few.
However, before the Senate can vote on the reconciliation bill it needs to know the legislation’s cost to ensure it complies with procedural rules. As previously stated, it is expected to take a few weeks for the Senate to complete the cost calculation process.
Upon Senate passage, a modified bill must return to the House where lawmakers in that chamber would either accept all changes made or make additional modifications the legislation. This process can be time-consuming given the number of changes made by the chambers, but the House and Senate must agree on the exact same bill for it to become law.
The infrastructure bill:
The Senate passed the infrastructure bill in August with bipartisan support. Since then, it has sat in the House.
The reason House Democratic leaders have delayed action on the infrastructure bill is because rank-in-file Democrats are divided in their support for it. One sector is not thrilled with supporting the infrastructure bill and prefer to advance reconciliation. Meanwhile, another sector within the same party holds the exact opposite position. They support the infrastructure bill and are not excited to support the reconciliation bill. Each sector has also vowed to block the bill they oppose until the legislation they support passes Congress.
To keep her party unified on both bills, House Speaker Nancy Pelosi (D-Calif.) has promised to vote on both measures at largely the same time. Some House Republicans could vote for the infrastructure bill and that would allow some Democrats to oppose the legislation. However, only a few Republicans are expected to support passage, and not enough to counter mass opposition from Democrats.
Tax provisions included in the infrastructure bill are here.
Both bills:
Upon passage of the infrastructure bill, Speaker Pelosi has said that it would be sent directly to the White House and be signed into law. This plan raises several questions about the fate of the reconciliation bill, which several moderate Democrats in both chambers are not thrilled to support.
Pelosi has linked enactment of the infrastructure bill contingent upon the reconciliation bill also becoming law. But if infrastructure is signed into law immediately after it passes the House, the incentive diminishes for moderate Democrats to support passage of the reconciliation bill.
Pelosi could keep the bills linked by holding onto the infrastructure bill after it passes the House, which would stop it from becoming law. By engaging in this strategy, the House Speaker could hold the infrastructure bill to ensure congressional passage of the reconciliation bill, which could be weeks away. Upon its passage, Pelosi could release both bills to the White House to be signed into law.
Again, Pelosi has not signaled this as a plan. But some are wondering (given moderate opposition to reconciliation) how Democratic leaders maintain member support for reconciliation if infrastructure has already been signed into law.
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