Build Back Better (BBB) Awaits CBO’s Cost Estimate; Hurdles Ahead
November 15, 2021
President Biden hosts a bipartisan bill signing ceremony for his Infrastructure Investment and Jobs Act today, along with a virtual summit with Chinese Premier Xi Jinping. While the administration and Congressional Democrats (as well as a few Republicans) celebrate the newly passed infrastructure bill, the Build Back Better (BBB) plan will continue to be the subject of intense negotiation on numerous fronts.
We continue to expect BBB – Biden’s signature family, children, and climate legislation – to ultimately be signed into law in some form and price tag, but the bill and the politics around it will likely continue to change. The macro spending goals, focused on social issues like child tax credits, climate, housing, and healthcare remain. A large spending item will also be the repeal of the state and local tax (SALT) deduction, which is a key provision for moderate Democrats. And while the taxes still focus on the wealthiest Americans making at least $400,000, provisions such as capital gains parity and higher marginal rates for corporations and individuals have dropped from the plan – for now. Much of the revenue is more narrowly focused on the extremely wealthy, tightening corporate tax rules, and enhancing enforcement. For more information on the evolution of the provisions, see our charts in the next story.
As of Sunday, November 14, based on the White House’s BBB Framework:
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- Child Care, Home Care, Preschool, Child Tax Credits
- Clean Energy and Climate
- Healthcare Credits
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- Medicare Hearing
- Housing
- Higher Ed and Workforce
- Equity & Other investments
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- 15% Corporate Minimum Tax on Large Corporations
- Stock Buybacks Tax
- Corporate International Reform to Stop Rewarding Companies
That Ship Jobs and Profits Overseas
- Adjusted Gross Income (AGI) Surcharge on the Top 0.02% of Americans
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- Close Medicare Tax Loophole for Wealthy
- Limit Business Losses for the Wealthy
- IRS Investments to Close the Tax Gap
- Prescription Drugs: Repeal Rebate Rule
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Pathways to Passage
While the process has been chaotic for both the infrastructure legislation and BBB, the manner in which each bill moves through Congress will be quite different.
- Bipartisan infrastructure bill was passed with bipartisan support:
- Moved first in the Senate following a bipartisan breakthrough;
- The House passed with no changes after a long-delayed and very narrow vote (where fewer than 20 lawmakers crossed the aisle).
- BBB’s (H.R. 5376) progress through the budget reconciliation process in Congress will happen quite differently:
- It will likely go through the House first (if and when it passes) by an incredibly-narrow, partisan vote (where Democrats have just a four-vote margin);
- Then move to the Senate (if and when it passes) with changes and likely happen fairly quickly by an even narrower margin, and may require a tie-breaking vote by the Vice President.
Time is not on this bill’s side as the longer it takes to make its way, the likely the greater its opposition. In the last week, the Tax Policy Center of the Urban Institute and Brookings Institution found that Build Back Better “2.0”
raises taxes for some ultra high-income households, but actually reduces taxes for other high income households earning less, which
Politico also
reported. And the bipartisan Committee for a Responsible Federal Budget estimated a
$200 billion gap in revenue over spending provisions.
Still Waiting on a CBO Score
The nonpartisan Congressional Budget Office (CBO) is “in the process of preparing a cost estimate for the current (House-drafted, but not passed) version” of BBB. CBO said in a
blog post that,
“When we determine a release date for the cost estimate for the entire bill, we will provide advance notice.”
Democratic leaders have warned that calculating the total cost of the legislation could take weeks, which could severely delay plans to pass the legislation perhaps even before the end of the year, as
five House moderates who indicated they “must first have the proper…scoring information before any floor consideration” in the House. The lawmakers’ letter noted that the, “Senate cannot even consider the BBB Act under reconciliation rules until it has received an official CBO score.” Democrats are counting on the CBO cost estimate to closely match the
estimate provided by the White House, to avoid more cuts to the roughly $1.75 trillion legislation, and CBO has begun to release what
few estimates it has. If the CBO and White House estimates don’t add up, lawmakers will need to make further cuts to the BBB legislation or find new tax increases to offset the new spending.
A key provision to watch is whether the CBO will share the White House’s estimate that $400 billion will be raised by increasing $80 billion in funding to the IRS. Last week, the IRS Commissioner, appointed by President Trump, wrote in a
Washington Post op-ed, “I strongly urge Congress to enact the administration’s proposal to provide us with $80 billion in vital funding over the next decade.”
Separately, on climate change, Michael Bloomberg pressed Congressional moderates to pass BBB in an op-ed last week by highlighting, “One important piece of the bill’s climate-related funding is to improve energy efficiency in buildings, which will help cities and states retrofit and upgrade old structures and adopt clean-energy codes for new ones.” Bloomberg’s op-ed also warned, “This month’s elections offer an early warning of what happens when the party in charge has few accomplishments to run on. Democrats won’t get this chance again, and neither will the nation.”
Two New Objections by Manchin
Beyond the CBO score, last week’s inflation report could push Sen. Joe Manchin (D-WV) to dig in his heels further to resist more government spending “potentially killing a quick deal on the $1.75 trillion package,”
Axios reported. Another source not typically tracked, The Automotive News, reported that Manchin said at an event last week for a Toyota supplier in West Virginia that pro-union EV tax credits in the current draft of an additional $4,500 if a vehicle’s final assembly takes place at a US facility on top of a $7,500 credit for purchase of a plug-in electric vehicle are "wrong" and "not American.”
Senate Schedule
According to a letter from
Senate Majority Leader Chuck Schumer (D-NY) on Sunday, a vote on BBB in the Senate will likely take weeks. In the interim, Senate floor activity will focus on a
bill and another short-term continuing resolution is all but certain to avoid a government shutdown on December 3. Schumer’s letter also acknowledges the Senate will need to act on the debt ceiling and outlines a series of meetings with the Senate Parliamentarian that are required in order to bring BBB to the Senate floor.