Congressional Update: $3.5 Trillion Federal Budget Proposal Grinds On
With members instructed by Speaker of the House Nancy Pelosi (D-CA) and Senate Majority Leader Chuck Schumer (D-NY) respectively to release their portions of the proposed $3.5 trillion reconciliation package by September 15, House and Senate Committees are actively working to prepare draft text in advance of committee consideration.
Among these, the House Ways and Means and Senate Finance Committees are debating their approach to capital gains and corporate taxes.
One solution reportedly under consideration would be to raise the capital gains rate from 20 to 28 percent for high-income earners, which would end up being an effective 31.8 percent rate when coupled with the Medicare surtax.
In addition, they have discussed raising the corporate tax rate from its current 21 to as high as 26 percent, as well as increasing taxes on companies’ international earnings from 10.5 to 15 percent. It is worth noting that each of these proposed tax figures are less than President Biden’s original Build Back Better agenda.
These potential tax revisions are estimated to generate up to $1 trillion in revenue over the next decade, which is important to many senators — especially Sen. Joe Manchin (D-WV) –concerned about adding to the national debt.
Even so, Sens. Manchin and Sinema (D-AZ) expressed their dissatisfaction with an overall price tag of $3.5 trillion.
In a Wall Street Journal op-ed published Thursday, Sen. Manchin said that he would not support the $3.5 trillion package “or anywhere near that level of additional spending” without further clarity on the economic impact of inflation and the national debt on current government programs.
“Democratic congressional leaders propose to pass the largest single spending bill in history with no regard to rising inflation, crippling debt or the inevitability of future crises,” Manchin wrote. “Instead of rushing to spend trillions on new government programs and additional stimulus funding, Congress should hit a strategic pause on the budget-reconciliation legislation.”
While details on the reconciliation proposal are sparse, House Democrats are exploring plans to provide $2.4 billion for the United States Postal Service to purchase and develop charging infrastructure for electric vehicles (EVs).
Under the proposed plan, post offices would become EV charging sites to expand access and accessibility.
Outside groups are seeking to influence the process as well. The Alliance for Automotive Innovation unveiled a list of EV Charging Infrastructure Principles that focus on the need for legislation, policies, investment and development to support customers as they buy or lease EVs.
The overall political dynamics of infrastructure and reconciliation remain tricky.
The House has pledged to begin consideration of the Senate-passed Infrastructure Investment and Jobs Act (IIJA) by September 27, but many progressive Democrats said they will not support IIJA until the Senate passes a reconciliation package.
Importantly, it is highly unlikely that a $3.5 trillion reconciliation package will pass both the House and Senate.
A smaller top-line spending level may be possible, which would reduce the need to create new revenue by revising the tax code. However, a decrease in overall size could also be problematic given House progressives all-or-nothing approach to passage.
Aside from reconciliation and consideration of the National Defense Authorization Act, most of Congress is in recess until the week of September 13 – setting up a sprint to accomplish a number of must-do items before federal funding expires on September 30.