Update on Infrastructure Legislation and Budget Blueprint
In last week’s Beyond the Bottom Line, we presented an overview of the Infrastructure Investment and Jobs Act. The bill passed the Senate yesterday in a 69-30 vote and now goes back to the House for its approval of the bill as amended. Although expected to be approved by the House, this bipartisan legislation now faces the possibility of a delay. House Speaker Pelosi, who cannot afford to lose more than three Democrats on a party-line vote, said she would delay consideration of the infrastructure package until the Senate passes legislation following through on the budget plan discussed immediately below. So, we are in wait-and-see mode on the passage of the Infrastructure Investment and Jobs Act by the House.
Following the vote mentioned above on the bipartisan plan, the Senate passed a $3.5 trillion budget framework which includes many of the budget proposals advanced by the Biden Administration that were not included in the bipartisan plan. The budget framework could enable sweeping changes to the nation’s health care, education and tax laws. The bipartisan plan above makes minor changes from a tax law standpoint. By contrast, the initial $3.5 trillion budget framework includes the significant tax law changes mentioned in the Treasury Department’s Green Book, the general explanation of tax proposals included in the Biden administration’s fiscal year 2022 budget submission to Congress.
In June, we provided a summary of the Green Book, which provided for significant tax law changes. The most talked about changes include increases in the corporate income tax rates and increases in the capital gain tax rate for higher income individuals, but other significant changes are also discussed in the previous summary. One new development in the budget framework is that the resolution also specifically references expanding the state and local tax deduction by increasing the $10,000 cap on the state and local tax (SALT) deduction for individuals itemizing deductions.
While the budget framework was approved by the Senate 50-49, the lawmakers must now translate their newly adopted budget into comprehensive legislation. This translation into a bill to be considered by Congress will involve significant negotiations. Unlike the bipartisan plan, the negotiations over the larger bill are likely to be among the Democrats who expect little if any support from their Republican colleagues. With no Republican support, the Administration and its allies in Congress would attempt to pass this legislation through the reconciliation process. Under the reconciliation process, a vote by party lines would be enough to pass the legislation, but that party line vote is not assured, with at least two Senators (Joe Manchin, D-W.VA. and Kyrsten Sinema, D-AZ) expressing serious concerns about the price tag. To get to a successful vote via reconciliation, the $3.5 trillion price tag may move through the negotiation process as the dollars to be put toward various programs are adjusted.
BMSS will continue to follow developments and keep you informed as they occur. if you have any questions about how you may be affected, please reach out to your BMSS professional.