House Sends Biden's $1.75T Budget Plan to Senate

House Sends Biden's $1.75T Budget Plan to Senate

The House passed President Joe Biden's $1.75 trillion domestic spending package Friday, November 19, approving a bill that would raise taxes on wealthy Americans and big corporations to pay for new or expanded tax incentives for child care, renewable energy and health care.

The chamber voted 220-213 in favor of H.R. 5376, the Build Back Better Act, sending the bill to the Senate, where lawmakers could decide to revamp the measure in light of a Congressional Budget Office estimate showing it would increase the federal deficit by $160 billion over a decade.

"This legislative package helps ensure that our continued recovery expands opportunity and financial security for all Americans," House Ways and Means Committee Chairman Richard Neal, D-Mass., said after the vote. "We leveraged the tax code to make the largest investment in combating climate change in American history while extending popular tax credits to put money back into the pockets of hard-working families."

Congressional Democrats have been negotiating with each other and the White House over the size and scope of the budget for months, finally dropping the initial price tag from $3.5 trillion and stripping out numerous priorities in late October.

House and Senate lawmakers spent those months fine-tuning the Build Back Better Act and its provisions addressing child care, education, family leave, health care and climate change. Republicans and a handful of centrist Democrats have been wary of what they have characterized as a bloated tax-and-spend proposal. Among the sticking points has been whether to raise the cap on state and local tax deductions.

The legislation would fund its spending proposals with individual and corporate tax increases that include raising the rates on several levies on U.S.- and internationally-based companies' foreign earnings. It would impose a 1% excise tax on corporate stock buybacks and a 15% alternative minimum corporate book income tax for businesses that report more than $1 billion in adjusted financial income.

The plan's tax hikes on high-income individuals include a 5% tax on taxpayers with modified adjusted gross income in excess of $10 million and an additional tax of 3% on income higher than $25 million.

The bill would also raise revenue by tightening net investment income rules for taxpayers, trusts and estates with incomes higher than $400,000, and by permanently restricting the use of excess business losses for non-corporate taxpayers.

The Joint Committee on Taxation estimated the legislation would raise roughly $814 billion from its domestic and international corporate tax provisions and $640 billion from tax increases on wealthy individuals.

Those tax revenues would be used to offset the cost of an expansion in social infrastructure and programs that Biden and the Democrats promised to voters. The bill would provide four weeks of paid family and medical leave, allow the Medicare program to negotiate the price of prescription drugs and set a limit on its out-of-pocket costs of drugs such as insulin.

The bill also includes a one-year extension of the expanded child tax credit for families earning up to $150,000 per year. In addition, an expanded earned income tax credit for childless workers would be extended for an additional year, while premium tax credits for health coverage under the Affordable Care Act would be extended for four years.

The plan would also expand renewable energy tax credits used for commercial facilities and residential developments, and it would provide incentives for energy transmission and storage, clean energy vehicles, renewable fuel sources and manufacturing.

It also includes provisions that would allow an above-the-line deduction of up to $250 in union dues and a payroll credit for compensation of local news journalists. The bill would recognize same-sex married couples in the tax code and give them leeway to amend past tax returns.

It would further dedicate more than $800 million to Federal Communications Commission programs to help families afford internet-connected devices, to aid schools in connecting students for at-home learning and to provide connectivity assistance and outreach.

Rep. Kevin Brady, R-Texas, panned the Democrats' legislation and said Biden is not living up to his promises not to increase taxes on those earning under $400,000. It won't even make the wealthy pay more in taxes, either, he said.

"Two out of three millionaires in America will see a huge tax cut in this bill," Brady said during his floor speech, citing studies he said show that about one-third of middle class Americans would see a tax increase starting next year.

The CBO released its estimate Thursday showing that Democrats' plans to boost Internal Revenue Service funding in the budget bill to increase auditing of wealthy Americans and businesses would not generate the $400 billion in revenue forecast by the U.S. Treasury Department.

Instead, the CBO estimated that the legislation would result in a net increase in the deficit totaling $367 billion over the coming decade. Provisions that boost IRS funding for audits would raise about $207 billion over the next decade, the agency said.

In a statement, U.S. Treasury Secretary Janet Yellen disagreed with the CBO figures, saying the Democrats' bill is more than fully paid for by "asking large corporations and the country's top earners to pay their fair share and by finally ensuring high-income tax evaders pay what they owe."

Armed with the CBO numbers and clearance from the Senate parliamentarian that it met that chamber's budget rules, House Democrats had expected to vote on the bill late Thursday. However, a lengthy floor speech from House Republican Leader Kevin McCarthy, R-Calif., delayed passage until early Friday morning.

House Speaker Nancy Pelosi, D-Calif., shrugged off McCarthy's eight-hour speech and said she fully expects Senate Democrats to make improvements so it can pass that chamber and then work out the differences in conference.

One issue still undecided is the treatment of state and local tax deductions. The House bill includes a proposal that would lift the SALT cap from $10,000 to $72,500, but Senate lawmakers have floated other ideas.

Some Senate lawmakers have suggested they would back a plan to permanently eliminate the cap for taxpayers who earn $400,000 per year or less. Others would prefer to raise the cap on SALT from $10,000 to $80,000 or remove it entirely from the tax code.

House Majority Whip James Clyburn, D-S.C., said he hasn't seen their SALT proposals but House Democrats are willing to compromise.

"We think we've got a good bill,'' he said. "They think they can make it better. Let them go at it. They may make it better. And we will accept better."

Immigration is another area expected to receive Senate attention. The House bill offers work protections and deportation relief for more than seven million undocumented immigrants, but it doesn't include a way for DACA recipients to gain permanent legal status and citizenship.

House Sends Biden's $1.75T Budget Plan to Senatehttps://www.cbiz.com/Portals/0/Images/HEro-Article-HouseSendsBiden's175jpg.jpg?ver=CfFjEK5unz4Erbj6brsObw%3d%3dhttps://www.cbiz.com/Portals/0/Images/Thumbnail-Article-HouseSendsBiden's175jpg.jpg?ver=5vutInXZ6RQymepAmeufuQ%3d%3dThe House passed President Joe Biden's $1.75 trillion domestic spending package Friday, November 19, approving a bill that would raise taxes on wealthy Americans and big corporations to pay for new or expanded tax incentives for child care, renewable energy and health care.2021-11-22T18:00:00-05:00The House passed President Joe Biden's $1.75 trillion domestic spending package Friday, November 19, approving a bill that would raise taxes on wealthy Americans and big corporations to pay for new or expanded tax incentives for child care, renewable energy and health care.Regulatory, Compliance, & LegislativeFederal TaxYes