$1.2T Infrastructure Bill passes while the Build Back Better Act still hangs on the lineBy Anne Zavaglia
Posted on November 8th, 2021
The Infrastructure Bill passed in the House late Friday, and is expected to go to President Biden to be signed into law. The Infrastructure bill, which has bipartisan support, passed in the Senate in August. It stalled in the House in recent months as Democrats worked to push President Biden’s social spending plan, known as the Build Back Better Act, through at the same time.
The Infrastructure Bill, named the Infrastructure Investment and Jobs Act, allocates $550 billion in federal spending over the next 5 years on the nation’s infrastructure. Improvements include repairs to roads and bridges, upgrades to our railways and electric grid, and eliminating lead pipes from our water systems.
While the $1.2 trillion infrastructure bill will be paid for by existing funding, new revenue is needed to finance the Build Back Better Act. Senator Joe Manchin (D-West Virginia) and Senator Kyrsten Sinema (D-Arizona) halted Biden’s original proposal from advancing. Gaining their support for the spending plan, has been key.
The Build Back Better Act with an original price tag of $3.5 trillion, has been cut in half to $1.75 trillion. To bring the cost down, many of the original provisions have been cut or scaled back. Resolving how the spending plan would be paid for has been the biggest hurdle. The Democrats intention has been all new spending would be paid for by various taxes, and taxes would not go up on those earning less than $400k per year.
Senator Manchin felt we have already spent a lot since the start of the pandemic, $5.4 trillion, and could not get behind another $3.5 trillion in spending. Senator Sinema did not support the reversal of the 2017 tax cuts for those earning more than $400k. She also opposed raising rates on corporations earning more than $5 million a year.
This past Saturday the House passed a rule that requires an official cost estimate of the social spending plan from the Congressional Budget Office before going to a vote. It could be several weeks before the CBO completes the estimate. Five House Democrats stated they will only vote in favor of the spending bill if they are happy with the CBO score.
The proposed tax revenue to pay for the spending plan differs widely from the tax legislation proposed in September. New tax revenue includes:
- 15% minimum corporate tax on corporations that report more than $1 billion in profits – starting in 2023.
- 1% surtax for companies that perform stock buybacks starting in 2022.
- 3.8% net investment income tax would apply to pass through business income over $400k.
- A new surtax on those with incomes over $10 million per year – 5% on those with incomes above $10 million, and an additional 3% on incomes above $25 million
- Limits contributions to IRAs for those with balances over $10 million. RMDs would also be accelerated for those accounts.
- $400 billion would be allocated to hire enforcement agents for the Internal Revenue Service. The agents would pursue those with high incomes who are evading taxes.
Democrats plan to include the spending bill as a part of the next budget reconciliation which allows them to pass it without Republican support. Should the CBO come back with an unfavorable score and the bill loses the support of moderate Democrats, the Build Back Better Agenda may be back to square one.