Loading component...
Sen. Joe Manchin Says He Won't Vote for ‘Build Back Better' Bill in Blow to President Biden – Michael Bender, Andrew Duehren and Lindsay Wise, Wall Street Journal ($). “Sen. Joe Manchin (D., W.Va.) said he would oppose his party’s roughly $2 trillion education, healthcare and climate package, a decision that likely dooms the centerpiece of President Biden’s economic agenda as currently crafted. ‘This is a ‘no’ on this legislation,’ Mr. Manchin said on Fox News Sunday. ‘I have tried everything.’”
Democrats have spent months drafting and revising the package, called ‘Build Back Better,’ to win Mr. Manchin’s support, which they need to pass the bill through the 50-50 Senate. Mr. Manchin has maintained his opposition to its design and many of its provisions, but his comments on Sunday cast the future of the legislation into fresh peril.
In a statement released following his appearance on Fox News Sunday, Mr. Manchin reiterated many of the concerns he has aired publicly about the bill, including its possible impact on inflation and the debt.
Mr. Manchin, who spoke with Mr. Biden multiple times last week about the bill, said on Fox News that he couldn’t explain a “yes” vote to the people he represents in West Virginia.
The Senator's statement is here.
The Biden Administration is none-too-pleased with the Senator:
Statement from Press Secretary Jen Psaki – White House:
Senator Manchin’s comments this morning on FOX are at odds with his discussions this week with the President, with White House staff, and with his own public utterances. Weeks ago, Senator Manchin committed to the President, at his home in Wilmington, to support the Build Back Better framework that the President then subsequently announced. Senator Manchin pledged repeatedly to negotiate on finalizing that framework ‘in good faith.’
… Just as Senator Manchin reversed his position on Build Back Better this morning, we will continue to press him to see if he will reverse his position yet again, to honor his prior commitments and be true to his word.
The rest of the Democrats are also none-too-happy:
Democrats outraged after Manchin opposes Biden spending bill – Mychael Schnell, The Hill:
Sen. Bernie Sanders (I-Vt.), the chairman of the Senate Budget Committee, said the West Virginia Democrat is ‘gonna have a lot of explaining to do to the people of West Virginia’ because he ‘doesn’t have the guts to stand up to powerful special interests.’
Rep. Ayanna Pressley (D-Mass.), one of the six progressive lawmakers who voted against the bipartisan infrastructure bill in November in opposition to the party moving forward without also approving the social spending and climate package, said Manchin is ‘obstructing the president’s agenda. He is obstructing the people’s agenda.’
Rep. Lloyd Doggett (D-Texas) said Manchin’s intent to vote ‘no’ on the Build Back Better Act is ‘an outrage,’ adding that ‘of course’ Manchin is siding with Republicans.
‘The Grinch just stole Christmas for many and don’t expect any last minute Dr. Seuss happy ending. After 6 months of talking and talking, Joe Manchin finally made it unequivocal, on Fox News, of course, he’s with the Republicans,’ Doggett wrote in a tweet.
Meanwhile, K Street is focusing on modifying the bill's tax increases.
Business Lobby Seeks to Delay Tax Rise That Funds Biden Spending Plan – Ted Mann and Brody Mullins, Wall Street Journal ($). “A coalition of large multinational companies has launched a late lobbying blitz to delay a tax increase on foreign earnings in the Build Back Better plan, saying it would hurt U.S. businesses when they compete with foreign rivals.”
The rate increase would codify a deal struck by Treasury Secretary Janet Yellen and nearly 140 other nations to set a floor under corporate rates around the world. It is designed to address corporate maneuvers that pack profits into low-tax jurisdictions. Lobbyists for the companies have determined that they are unlikely to persuade Mr. Biden and Democratic leaders in Congress to scrap the new international taxes altogether. So they have shifted to lobbying Congress to delay the effective date of the new tax regime until other countries adopt the minimum tax, too.
Oil-and-gas companies are trying to block new taxes on natural gas that they argue would harm domestic energy producers.
As the rest of Washington D.C., focuses on the rest of the bill:
Democrats Brace for Rewrite of Biden Spending Plan to Woo Joe Manchin – Richard Rubin and Andrew Duehren, Wall Street Journal ($):
To address as many policy priorities as possible and limit the price tag, Democrats funded many programs—including an expanded child tax credit, a universal prekindergarten program and healthcare subsidies—for the short term. For most Democrats, that was a way to please multiple constituencies, show progress on long-term goals and make a bet that future Congresses would extend the programs. To Mr. Manchin, it was an unacceptable budget gimmick.
Now, as President Biden and top Democrats try to salvage the bill and win Mr. Manchin’s necessary support in the 50-50 Senate, they are grappling with the possibility of axing prized priorities and funding fewer programs for longer periods.
Schumer vows to "get something done" on Biden plan – Mike Allen and Margaret Taley, Axios. “Despite Sen. Joe Manchin's desertion, Senate Majority Leader Chuck Schumer tells colleagues in a letter this morning that he plans a vote on a revised Build Back Better ‘very early in the new year.’"
- Schumer said he wants every senator to have "the opportunity to make their position known on the Senate floor, not just on television."
- ‘We are going to vote on a revised version of the House-passed Build Back Better Act — and we will keep voting on it until we get something done,’ Schumer writes.
What these developments mean:
- The bill is not dead.
- Democratic leaders will fine-tune the legislation over the holidays and into the New Year.
- The bill’s contents are likely to shrink, meaning provisions currently included in the legislation will be cut or severely curtailed.
- Regarding tax increases in the bill: Senator Manchin supports deficit reduction. This could mean that spending or tax relief could be modified in the bill, but what happens to the tax increases is unclear. Despite lobbyists' efforts, the legislation could raise more revenue than the cost of the bill and those funds could be used for deficit reduction, which would make Manchin and other congressional Democrats happy.
- The fate of all provisions is very fluid.
- Bottom line: Stay tuned. It ain't over.
SALT-Cap Expansion Has Nowhere to Go as Biden Agenda Stalled – Laura Davison, Bloomberg ($). “Democrats have limited legislative paths to expand the federal deduction for state and local taxes if President Joe Biden’s economic agenda remains stalled indefinitely because of Senator Joe Manchin’s opposition.”
A vocal group of Democrats, largely representing high-tax areas in New York, New Jersey and California, have made the state and local tax -- or SALT -- write-off a must-include provision of the roughly $2 trillion tax and spending bill.
But if that legislation can’t get through Congress, lawmakers have little hope of finding another way to expand the tax break before the end of next year. That’s because it’s unlikely to move as a standalone bill, facing headwinds among some Democrats.
Top 2021 State and Local Tax Story? SALT Cap Workarounds – Michael Bologna, Bloomberg ($). “Even state and local tax wonks get a little melancholy around the holidays, remembering the year that was and lamenting the opportunities for tax harmony, conformity, and deductibility that got away."
Grant Thornton offered a glimpse of that sentiment this week with its annual “Top 10 SALT Stories,” as did Eversheds Sutherland on its SALT Shaker podcast.
In the spirit of harmony during this holiday season, Bloomberg Tax compared the two lists and created a consensus ranking of the top five SALT stories from 2021, reflecting the views of a top SALT accounting practice, and a top SALT law firm.
Tax Bills for Rich Americans in Doubt With Biden’s Plan Adrift – Laura Davison, Bloomberg ($). “A tax year that just months ago was set to end with a frantic scramble by wealthy Americans to complete moves averting the biggest tax increases in a generation is instead concluding with a cloud of confusion.”
With President Joe Biden’s signature tax-and-spending bill bogged down in wrangling among congressional Democrats and punted until next year, tax advisers are at a loss for how to guide their rich clients. That’s after they for months had counselled individuals to be ready to post more income in 2021, before the tax changes took effect. Now, the shape of the overhaul and the date of effectiveness are in doubt.
‘Planning has been put on hold, because no one knows what the rules of the game are,’ Mike Greenwald, a partner at accounting firm Friedman LLP, said. ‘There is no understanding of how the game is played. There are real business decisions that people need to make.’
Biden Climate Agenda Now Hinges on Rules Exposed to Rewrite – Ari Natter and Jennifer Dlouhy, Bloomberg ($). “President Joe Biden will need to rely far more on regulation to meet his promise to cut greenhouse gas emissions in half by 2030, after his roughly $2 trillion economic plan and its crucial climate provisions suffered a potentially fatal setback in Congress."
The tax-and-spending bill rejected Sunday by West Virginia Democratic Senator Joe Manchin included a record $550 billion for climate measures, including a slew of tax credits for clean energy generators, the nuclear power industry and the makers of electric vehicles. As passed by the House, the Build Back Better bill included a first-time fee on the emission of methane from oil and gas operators.
New Wyden Partnership Tax Proposals Deserve Consideration - Monte A. Jackel, Tax Notes ($). “The partnership proposals introduced by Senate Finance Committee Chair Ron Wyden, D-Ore., on September 10 have generated some controversy among the tax bar and other special interest groups — some of it fair, some unfair, some generated out of legitimate concern for good tax policy, and some for client and personal interest. This article summarizes the various partnership proposals that Wyden has put forward and describes the key partnership provisions in the reconciliation bill passed by the House on November 19.”
LSU, USC Football Coach Pay Targeted in Democrat’s Tax Inquiry – Laura Davison, Bloomberg ($). “The pay packages for the newly hired football coaches at Louisiana State University and the University of Southern California are being targeted in a House Democrat’s inquiry about whether those pay arrangements violate the tax code.”
Representative Bill Pascrell, a member of the House Ways and Means Committee, sent letters Friday to the presidents of the two universities to inquire about the compensation of Brian Kelly, who is reportedly being paid $95 million on a 10-year contract by LSU, and Lincoln Riley, who has a contract reportedly worth $110 million at USC. Both were hired away from other schools.
Pascrell says he has ‘significant concerns’ about whether those contracts are in accordance with the rules governing tax-exempt organizations about highly-paid employees.
IRS raises some mileage rates for 2022 – Jeff Stimpson, Accounting Today. “Two categories of 2022 optional standard mileage rates, used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes, are rising slightly next year.”
Beginning Jan. 1, standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
- 58.5 cents per mile for business use, up 2.5 cents from the 2021 rate;
- 18 cents per mile for medical purposes or moving purposes for qualified active-duty members of the Armed Forces, up 2 cents from this year; and,
- 14 cents per mile in service of charitable organizations, the same as this year.
California Cannabis Pleads for Tax Breaks, Warns of Implosion – Joyce Cutler, Bloomberg ($). “The state and the illicit market are the only entities profiting from California cannabis, operators from the farm to the dispensary told Gov. Gavin Newsom Friday, urging him to include a tax holiday in the budget proposal next month.”
California’s heavy taxation and regulatory scheme is crushing the legal industry, 29 growers, retailers, and advocates said in a letter to Newsom and legislative leaders. The group warns that those in the legal, licensed market may be pushed back underground to survive. They want the state to eliminate the cultivation tax, enact a three-year excise tax holiday, and expand retail access.
‘Excessive taxation, which compounds across the supply chain, makes our product 50% more expensive at retail than the illicit market. This has created an illicit market that is currently three times the size of the legal market,’ they wrote.
OECD Model Rules Set Countries on Track to Adopt 15% Minimum Tax – Isabel Gottlieb and Hamza Ali, Bloomberg ($). “Countries have for the first time gotten a detailed picture of the rules they’ll use to implement a newly agreed 15% global minimum tax rate."
Model legislation—released Monday by the Organization for Economic Cooperation and Development—is the first major stage in the implementation of a far-reaching global tax deal signed by nearly 140 countries in October. The minimum tax, known as Pillar Two, aims to discourage countries from competing to attract corporations by offering low tax rates. The new rules let countries apply extra tax on companies not meeting a 15% effective minimum rate in another jurisdiction.
The model legislation can be found here.
The OECD legislation is focused on "Pillar Two" of the its proposal. Pillar Two is the global minimum tax of 15%. President Biden's reconciliation bill includes a 15% global minimum tax, but that piece of legislation is indefinitely stalled in Congress.
Does the OECD Deal Reset the International Economic Order? – Mindy Herzfeld, Tax Notes ($):
Itai Grinberg, Treasury deputy assistant secretary for multilateral negotiations, recently explained how his new position with the department came about, how the United States will benefit from the OECD tax deal, and how the multilateral agreement on international tax policy is at the forefront of a reset of the international economic order. But the administration’s narrative isn’t entirely consistent with unfolding events, and the importance it’s placed on international tax changes raises questions about what happens to the rest of its agenda if the tax deal fails to produce the desired results. Conversely, it’s unclear what happens to the global tax deal if the administration fails to pass its domestic agenda.
Delayed Biden Spending Plan Throws Curveball at Global Tax Pact – Michael Rapoport, Bloomberg ($). “A delay in passing President Joe Biden’s tax plan stands to have ripple effects beyond the U.S.’s borders, potentially jeopardizing the delicate balance of an agreement to overhaul the global tax system.”
Democratic leaders have delayed action on Biden’s $2 trillion plan until next year as they struggle to win the support of Sen. Joe Manchin (D-W.Va.), a key holdout vote. But the package includes measures that are crucial to the U.S.’s participation in the 137-nation global tax agreement reached in October. If those measures are pushed back or aren’t enacted at all, some tax practitioners fear that could mean trouble for the global agreement, too.
A failure by the U.S. to adopt those changes could cause the global pact ‘to unravel more broadly,’ said Manal Corwin, principal in charge of KPMG’s Washington National Tax Practice and a former Treasury Department official.
Happy Go Caroling Day! Here is some background on the activity courtesy National Day Calendar:
The tradition of singing carols has roots in pagan celebrations of the Winter Solstice. Carols were later adopted by the Christian faith to celebrate the nativity during the 4th and 5th centuries and were primarily sung in Latin. St. Francis of Assisi improved the popularity of singing carols when he paired the songs with stories (canticles), and the songs were performed in modern languages. The Victorian era saw a surge in caroling, and many popular caroling songs still sung today were written during this era.