Sometimes, You Take What You Can Get, and You Don’t Throw a Fit
Last week the inflation numbers came out and Sen. Joe Manchin decided he wanted to see what inflation numbers continue to do before moving forward with a reconciliation package, perhaps in September.
- However, Manchin also says that if Senate Majority Leader Chuck Schumer still wants to move a very slimmed-down version of a reconciliation bill forward in July—something most Democrats support with midterm elections coming up—then Manchin is open to supporting a smaller bill allowing Medicare to negotiate prescription drug pricing and extending Obamacare health insurance premium subsidies for two years.
- As such, Manchin has now withdrawn his support for including tax increases or spending on climate and energy provisions in the reconciliation package (again, citing concern over rising inflation and saying that if people can’t afford to buy gas and groceries, now is not the time to be raising taxes or increasing federal spending). But he may change his mind once July inflation numbers are released in August.
- According to the Joint Committee on Taxation, the energy and tax provisions from the Build Back Better Act that the Democrats are attempting to pass in a slimmed-down version are likely to result in tax increases for taxpayers at all income levels beginning in 2023.
- Remember, the reconciliation instructions for the 2022 fiscal year expire September 30, so that’s an absolute stopping point for Democrats if they want to advance anything via the reconciliation path, which only requires 50 votes in the Senate.
- This leaves an open decision point for Democrats: do they take this small win with prescription drug pricing and Obamacare subsidies now, or wait until the absolute last minute in September for something bigger?
- The White House says to take the deal and pass the bill before the August recess.
- Here is what Ways and Means Committee Chair Richard Neal has to say about this: “So my position has been that if we can get a bigger deal with some certainty, we’re willing to hold out. But if we are gonna go to the altar again and not have somebody say ‘I do,’ then we would have to take the immediate.”
- Word on the street is that Democrats want to take the win before midterm elections, so work is in progress on a reconciliation bill with only drug prescription pricing provisions and an extension of healthcare subsidies.
- Timing: We’ll know more later this week once the Senate Parliamentarian shares the results of their review of the legislative text Democrats submitted on drug prescription pricing, which means it will be another week or two before something is ready to go up for a vote through the reconciliation process.
There’s a Pulse on USICA, But Just Barely
Meanwhile, Democrats are warming up to the idea of compromising on USICA (the semiconductor/domestic manufacturing bill currently in conference committee).
- Last week, Senate Minority Leader Mitch McConnell and other Republicans said there won’t be a bipartisan USICA as long as Democrats are pursuing a partisan reconciliation bill.
- However, this week, McConnell is saying that he’s open to a bill that would only provide funding for U.S. semiconductor chip makers (to the tune of $52 billion), since Democrats are considering passing a pared-down version of the reconciliation bill.
- The Democrats are taking this opening and introduced the Creating Helpful Incentives to Produce Semiconductors (CHIPS) Act of 2022. The draft legislative text includes subsidies for chipmakers and a 25% manufacturing investment tax credit. This tax credit would apply toward building or monetizing semiconductor fabrication facilities.
- Senate floor votes are expected to start this week on the CHIPS Act, with senators lobbying for various other additional provisions to be included, like encouraging non-Chinese 5G equipment manufacturing. Schumer is open to including more provisions as long as the votes are there to ultimately pass the bill.
In Case You Missed It
- Sen. Elizabeth Warren introduced the Tax Simplification Act of 2022, which would simplify the tax filing process for millions of Americans and require the IRS to provide its own free online tax filing services. Companion legislation has been introduced in the House as well.
- Due to Individual Taxpayer Identification Number processing delays, a group of senators are asking the IRS and Treasury to extend the deadline for families to apply for the advance child tax credit.
- The OECD issued a progress report on Amount A of Pillar One, which proposes to reallocate a portion of global profit of multinational enterprises from residence and source jurisdictions to their market (sales destination) jurisdictions.
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