Status Update: Where things stand in Congress for Biden’s Jobs and Families plans

With the House and Senate on recess, now is a good time to provide a status update on where things stand for legislation that President Joe Biden wants enacted into law.

The President released the following plans earlier this year: 

• The American Jobs Plan:
  • Released on March 31
  • Includes over $2 trillion in tax increases on corporations and fossil fuels
  • Price tag lowered to $1.7 trillion and is now $1.2 trillion
  • Lawmakers have begun discussing this plan 
• The American Families Plan:
  • Released on April 28
  • Includes roughly $1.6 trillion in tax increases on wealthier taxpayers and increases tax compliance
  • Lawmakers have yet to have in-depth discuss on this plan

Neither of Biden’s plans have been turned into legislation (more on this later)

Congressional Democratic leaders have employed a two-track approach to turning the American Jobs Plan and the American Families Plan into legislation. Lawmakers are expected to work on both tracks simultaneously   

Track One:

• The American Jobs Plan:
  • In the Senate:
    • President Biden and a bipartisan group of Senators agreed on a $1.2 trillion infrastructure proposal that does not increase personal or corporate income taxes
    • Senate Democratic leaders hope to vote on this bill as soon as next week
      • This goal will be hard to achieve given that legislation is not yet written
    • Senators are currently writing up the legislative text for this bill
    • The Senate has formed working groups to straighten-out unsettled provisions in the $1.2 trillion infrastructure proposal
      • The creation of working groups usually means that Committees will not be involved in writing the legislative text
    • The bill is expected to be based on the “framework” that was released in June
      • The framework includes a topline dollar figure of $579 billion for new spending on roads, bridges, public transit, ports, airports and broadband technologies
    • The framework’s cost is expected to be fully paid-for by:
      • Reducing the IRS tax gap (originally in the American Families Plan)
      • Improving unemployment insurance program integrity
      • Redirecting unused unemployment insurance relief funds
      • Repurposing unused relief funds from 2020 emergency relief legislation
      • State and local investment in broadband infrastructure
      • Allowing states to sell or purchase unused toll credits for infrastructure
      • Extending expiring customs user fees
      • Reinstating Superfund fees for chemicals
      • 5G spectrum auction proceeds
      • Extending mandatory sequester
      • Strategic petroleum reserve sale
      • Public private partnerships, private activity bonds, direct pay bonds and asset recycling for infrastructure investment
      • Macroeconomic impact of infrastructure investment
  • While details are currently scant for how these provisions will work, some highly respected budget prognosticators off Capitol Hill say these provisions will not fully offset a $1.2 trillion bill
  • A bipartisan group of 58 House lawmakers, called the Problem Solvers Caucus, has endorsed this plan
  • Senate Finance Committee Chairman Ron Wyden (D-Ore.) wants to add tax increases to the bill
    • He seeks an increase in the corporate income tax and taxing unrealized capital gains on wealthier taxpayers
    • If Wyden succeeds in this endeavor, no Republicans will support this bill, and it will fail

• In the House:
  • House lawmakers approved in June a $715 billion surface transportation bill (H.R. 3684)
    • This is a spending bill and does not contain any tax measures
    • Rep. Peter DeFazio (D-Ore.), who chairs the House Transportation and Infrastructure Committee, recently told reporters that a tax title could come later. It is not clear what he meant since the House has already passed the bill
    • This is not the American Jobs Plan, according to House Democratic leaders
      • They say this bill will be the basis for what they will use when conferring with the Senate and President Biden on their $1.2 trillion proposal

• Votes needed to pass if legislation for the American Jobs Plan is created:
  • The House: a simple majority
    • Can pass with only Democratic support
    • No Republican support expected
  • The Senate: at least 60 votes
    • At least ten Senate Republicans must support this bill for it to pass
    • It is not clear if there is enough Republican support to pass the bill

• Possible next steps:
  • Assuming the Senate can pass its legislation for the American Jobs Plan, it will likely be different from what the House passed, i.e., the $547 billion surface transportation bill (H.R. 3684)
  • Normally, these bills would immediately be conferenced to hash-out the differences between the bills
  • Instead, a conference on legislation for the American Jobs Plan could be tabled so action can begin on the American Families Plan

Track Two:

• The American Families Plan:
  • Congressional Democrats seek to move this bill through a process called “budget reconciliation”
  • Democratic congressional leaders must first pass a budget before they can use budget reconciliation to move their American Families Plan
  • Both chambers must agree on the same budget
  • The Senate hopes to pass a budget this month
  • It is unclear when the House will vote on a budget

• In the Senate:
  • Senate Budget Chairman Bernie Sanders (I-Vt.) is preparing a budget that includes “reconciliation” instructions
  • The instructions are expected to allow a bill costing $6 trillion with $2.4 trillion in tax increases
  • Many of the tax provisions to be in Sanders’ plan were included in the Jobs and Families plans. They were explained in the Treasury’s Green Book and include:
    • Raising the corporate income tax rate from 21% to 28%
    • Taxing long-term capital gains and qualified dividends at ordinary income tax rates for taxpayers with adjusted gross income of more than $1 million
    • Significantly modifying the taxation of the international activities of U.S.-owned businesses
    • Limiting the amount of gain eligible for deferral under section 1031
    • Repealing tax provisions benefiting the fossil fuel industry
    • Providing additional tax incentives for renewable and alternative energy
    • Transferring appreciated property by gift or on death would be taxed as realization events, subject to a $1 million per person exemption, effectively allowing stepped-up basis with respect to exempted property
    • Ensuring that all trade or business income of taxpayers with adjusted gross income in excess of $400,000 would be subject to either the 3.8% Medicare tax or the 3.8% net investment income tax
  • The Sanders proposal provides relief on the SALT deduction cap, but details have not been made public
  • On the Spending side, this bill will address an array of issues, like childcare, elder care, day care as well as Medicare, climate and immigration matters
    
    • Reconciliation rules may not permit some of these provisions being in the bill

• In the House:
  • House Budget Chairman John Yarmuth (D-Ky.) will wait to release his budget proposal until the Senate passes its budget resolution

Possible next steps:

• After the House and Senate pass the same budget, committees in both chambers are expected to use the reconciliation instructions to write the legislative text for the American Families Plan
  • The legislative process will require action from several committees and is expected to take a while

• Votes needed to pass if legislation for the American Families Plan is created:
  • The House: a simple majority
  • The Senate: a simple majority (51 votes)
    • Budget reconciliation rule allow passage with a simple majority
    • There are 50 Democratic Senators, so all of them need to support the bill
    • Vice President Kamala Harris would be the 51^st vote

Prospects for passage:

• Jobs Plan: Progressive Democrats in both chambers could oppose it
  • They think its benefits are too narrowly focused, i.e., not enough aid to familes
    • House: Can only lose four Democratic votes before it fails
    • Senate: If Dem opposition is widespread, passage depends on GOP votes, which is dicey
    • If this bill fails to pass, it could be rolled into the Families Plan
• Families Plan: Moderate Democrats are not fond of the bill
  • They say it spends too much and increases taxes
  • No Republican from either chamber is expected to support it
    • House: Can only lose four Democratic votes before it fails
    • Senate: If one Democrat opposes it, it fails

• Since Biden released these plans, it seems less likely that they will be enacted into law. However, that could change. There is a saying on Capitol Hill that legislation is assumed to fail – until it passes. This could be true for Biden’s plans, but it is too early to tell
• The House and Senate are expected to vote on both bills in the fall