Accomplishing the goal of adequate U.S. infrastructure funding has been a critical talking point in recent months on Capitol Hill. One of President Biden’s major legislative accomplishments was the American Rescue Plan. It was a $2.2 trillion bill that extended federal unemployment bonuses through early September, provided $300+ billion to state and local governments, disbursed $1,400/person economic impact payments, and enhanced the child tax credit for 2021. The Rescue Plan was considered under budget reconciliation rules allowing for a simple majority vote in the Senate. Only Democrats voted for the bill in the House and Senate. Since its passage in March, President Biden and his Democrat congressional allies have been searching for a bipartisan legislative vehicle to follow through on his campaign promise of unity.
For the last several weeks, it appeared that bipartisan Senate negotiators were nearing that goal on infrastructure. A group of 22 Senators (11 from each party) agreed to, and President Biden endorsed a $1.2 trillion infrastructure framework. The issue of infrastructure investment has always been bipartisan, especially when considering how to SPEND money. The main obstacle to any larger infrastructure investment has been the negotiation around paying for it. This particular negotiation is no different as disagreements over ‘pay fors’ have stalled the development of the policy package. Initially, the bipartisan group had the momentum to decrease the tax gap. This involves increasing IRS funding to pursue outstanding tax collections and performing more aggressive audits on businesses and individuals. As that concept gained momentum, a growing number of Republicans grew weary of an empowered IRS, particularly the potential impact on small businesses and higher tax bills. Ultimately, that mechanism has been removed from the bipartisan talks leaving the group unsure of the next steps.
Moving forward on a separate track has been a Democrat-only effort on a larger economic recovery package, built on the American Jobs and Families Act proposals from the Biden Administration. Both parties have been strategizing on the benefits of passing a bipartisan spending bill focused on infrastructure while Democrats pursue another partisan reconciliation measure. This $3.5 trillion framework includes a Medicare expansion to include vision, hearing, and dental benefits for beneficiaries as well as investments in clean energy technology, jobs, Community College for All, expansion of the Child Tax Credit, and other provisions. Republicans have vowed to oppose this, while moderate Democrats have expressed that the measure needs to be offset/paid for.
This has led to advanced conversations amongst the Democrat conference on tax increases for businesses and wealthy individuals (income over $400,000). Those tax proposals are not ready to be considered just yet, but with the prospects for a bipartisan package in danger, a Democrat pivot to a reconciliation bill is likely to entail several tax policy changes to account for the federal spending proposed.
HFA has been engaged with policymakers and staff from all sides of the political spectrum to push back against tax increases to businesses, especially in light of the ongoing COVID-19 pandemic and its impact on operations. While we support targeted investments in U.S. infrastructure to help address issues with ports, roads, and bridges, those improvements should not be financed by businesses that have played a key role throughout the pandemic by keeping people employed safely and providing essential goods to consumers.