On June 24, 2021, President Biden reached agreement with a
bipartisan group of Senators on the $1.2 trillion Bipartisan
Infrastructure Framework (the Framework), which makes investments
in transportation, clean water and power, and universal broadband
infrastructure. Importantly, this "traditional"
infrastructure package is financed primarily with non-tax revenue
offsets and does not include any of the dramatic tax increase
proposals contained in the Treasury Department Greenbook. Consideration
of the Framework, and its impact on a subsequent Democrat-only
reconciliation bill, will play out over the next few months and we
expect it to be a rollercoaster.
The initial reaction to the Framework demonstrates how tenuous its
bipartisan support is. When the Framework was announced, President
Biden, the Speaker of the House, and the Senate Majority Leader
linked consideration of the Framework to the subsequent
reconciliation bill – with President Biden explicitly stating
that both proposals needed to move "in tandem" and Leader Schumer noting that
"[o]ne can't be done without the
other." Linking the two proposals was an effort to appease
progressive Democrats who want assurances that their health care,
paid family medical leave, and other "human resource"
infrastructure priorities (along with significant tax increases)
will be addressed in the reconciliation bill and be supported by
moderate Democrats. However, the President predicating support for
the Framework on the passage of the reconciliation bill caught
Republican negotiators by surprise and President Biden
ultimately reversed his position linking the two
proposals. Balancing the concerns of progressive Democrats with the
need to maintain Republican support of the Framework will be a
continuing theme as Congress considers this proposal.
Aside from its linkage to the Framework, the reconciliation bill
faces significant hurdles along its journey to consideration and
enactment. There is still widespread disagreement as to the scope
and content of the spending package, particularly the amount of the
package that will be deficit-financed and the amount of the package
that will be financed with tax increases. Progressive Democrats
envision an extremely large spending package (with Senate Budget
Committee Chairman Bernie Sanders (I-VT) articulating support for a
$6 trillion package) utilizing the Greenbook tax increase proposals, whereas
moderate Democrats are contemplating a smaller spending package and
questioning the scope and magnitude of the Greenbook proposals.
Senator Joe Manchin (D-WV), a key moderate swing vote in the
Senate, has a long-standing position of increasing the corporate
tax rate to 25 percent (as opposed to 28 percent as proposed in the
Greenbook) and recently announced that he favored a less
dramatic increase in the capital gains rate to 28 percent:
"Right now, I never thought that the net corporate tax should
have been 21 percent. I always felt that 25 was very fair and
balanced. So I'm willing to go to 25. I think that basically
capital gains should be at 28 percent, not at 21." Formulating
a reconciliation bill that will appease the progressive and
moderate wings of the Democratic party – both from a spending
perspective and a revenue perspective – will be a challenging
exercise that will play out well into the
fall. #TaxTake
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