Senator Manchin has taken his stand—he wants the Build Back Better Act thrown out entirely.
"If I can’t go home and explain it to the people of West Virginia, I can’t vote for it. And I cannot vote to continue with this piece of legislation. I just can’t. I’ve tried everything humanly possible, I can’t get there… This is a no on this legislation." -Senator Manchin
The next moves legislatively are up to the President, Senator Schumer and Speaker Pelosi.
TIA believes a budget reconciliation bill can survive because it’s necessary to fund the government.
Recall that the Federal government is being funded by a continuing resolution which expires in February. Thus, a must-do bill to fund the government to the end of FY 2022 has good odds of being enacted around that time.
Congress can elect to pass another CR in February—but that means every department of government will be operating mostly on last year’s funds and staff.
On November 19th, the House passed the Build Back Better Act (the “BBB”) (HR. 5376).
In the tax area, many of the provisions which could have been very detrimental to small businesses and their owners were removed from the final House passed version of the BBB.
Specifically, in the final House bill, this is what happened with the proposed tax provisions:
Now the action moves to the Senate. It’s too soon to judge what the Senate version will look like or even when it will be brought up, however it seems unlikely that any other negative tax provisions will come in, particularly with Senator Manchin having the deciding vote. Senator Bernie Sanders (I-VT) may have a lot to say but the Senators who will be most important are Joe Manchin (D-WV) and Kyrsten Sinema (D-AZ). Based on Senator Manchin’s comments, it is possible he will require some of the new social programs in the House passed version of the BBB be pared back or eliminated which will reduce the cost of the bill. He has specifically mentioned having concerns with the paid leave program in the bill, as well as expanding Medicare, creating a methane emission fee and having a larger tax credit for union-made electric vehicles. Senator Sanders, among other things, wants to expand the House version which expanded Medicare to cover hearing, to also include coverage for vision and dental. This will only happen if Senator Manchin is okay with it, which is doubtful. He has already expressed concern that the country cannot pay for Medicare as it stands today let alone afford to expand it. It is also possible that the Senate will cut back the House’s SALT provision so the deduction is only available to those taxpayers who are below the $400,000 filing single and $450,000 filing jointly income thresholds or some higher threshold. If the Senate did entirely throw out any changes to the SALT deduction, it is quite possible that it would be brought back in conference as the deduction was the critical factor in wooing the votes of a number of House Democrats from high tax states.
Senator Manchin does not seem to be in any rush to do anything that would position Senate Leadership to bring the bill up until at least the end of the year because of his concerns with parts of the bill, inflation, and the Senate’s busy schedule, including raising the debt ceiling and getting a defense bill through. If Senator Manchin sticks with this approach, then the conference likely would be in the spring. It is even possible that the Democrats in the Senate will fail to pass the bill.
You may have noticed that for months Speaker of the House, Nancy Pelosi (D-CA) was trying to get a bill passed in the House that would be able to get through the Senate unchanged. When it became apparent that to get the infrastructure bill through the House, the BBB bill would have to be decoupled from a version acceptable to the Senate, Speaker Pelosi freed the Representatives to pass the version they wanted. The House Democrats know this version will not get through the Senate and basically the House will have to adopt whatever comes out of conference.
It took a lot of work for a number of associations to get rid of the most damaging tax provisions (many of which would have hit upper middle class taxpayers as well as small business owners). For its part, TIA was one of the first groups to respond to initial proposals to eliminate the step-up in basis and reduce the estate tax exemption which started to crop up a few years back by starting to educate folks on the Hill as well as the other small business associations as to the damage these provisions could wreak. We also were one of a handful of associations to lead the charge against the potential harmful limitation of the 199A deduction. TIA also worked with many other associations, including the Independent Community Bankers of America, to oppose and eliminate provisions that would have required reporting of numerous banking transactions to IRS.
As of now, BBB went from a bill with many potentially disastrous tax provisions for small businesses to one whose major tax provisions are aimed squarely at the ultra-wealthy. It’s probably too early for privately owned and family-owned businesses to breathe a sigh of relief but we’ll know soon enough whether they can.