News: Another week, another BBB update

Tuesday, June 21, 2022

Another week, another BBB update

Jun 21, 2022

STILL TALKING? STILL TALKING: It hasn't been a fast-moving process. But Sen.Joe Manchin (D-W.Va.) and Senate Majority Leader Chuck Schumer haven't stopped talking about a slighter version of the Build Back Better agenda that Democrats were pushing last year.

Manchin and Schumer met twice last week on a potential measure to raise taxes on the rich and corporations, and enact new climate and prescription drug provisions, as our Burgess Everett reported.

Democrats also are sounding increasingly confident that a deal can be reached at some point before Congress breaks for the August recess. But as with everything BBB-related, it's probably not wise to make any grand assumptions yet about whether Democrats will or won't be able to work something out in the end.

This much is clear, though — Democrats still have plenty of hurdles to clear before a slimmer BBB might make it to President Joe Biden's desk.

MORE ON THAT IN A BIT, but first thanks for coming to the "yes, it's definitely BBB crunch time" version of Weekly Tax. Thanks also to today's weather — very fitting for celebrating the fourth birthday of the very sunny Littlest Tax.

Talk about optimism: Today marks 109 years since Georgia "Tiny" Broadwick — all of 5 feet tall and 80 pounds — became the first woman to ever parachute out of an airplane.

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ABOUT THOSE HURDLES: The first obstacle for Democrats is pretty clear — finding a deal that Manchin will sign off on.

But there's a related issue there for Democrats, too: Sen. Kyrsten Sinema (D-Ariz.) hasn't taken part in these Manchin-Schumer talks, by design — though she's also quite busy with the gun control talks.

Still, Sinema's opposition to tax rate increases led Democrats to something of a grab bag of revenue raisers for the first BBB, so she'll still have to bless whatever (if anything) might come out of the current discussions.

And then there's the calendar: Congress has a two-week recess after it completes its work for this week. Once lawmakers return, the House is only scheduled to be in session for three more weeks before it heads out for August recess. (The Senate has a fourth week on the books.)

So Democrats don't have a ton of time for this deal to come together, though Schumer and his team are already starting to bounce potential ideas off the Senate parliamentarian.

To put that another way: Basically everyone acknowledges that the current talks between Schumer and Manchin are real. But some people closely watching the situation wonder if the discussions are moving quickly enough given that July is right around the corner.

One final point: Everyone that Weekly Tax reached out to on Monday thought that a BBB-light bill wouldn't die in the House, if it makes it through the Senate.

There's a variety of reasons for that. But perhaps first and foremost: People have a hard time imagining that a big bill like this would go down on Speaker Nancy Pelosi's watch, especially as questions still swirl about how long she'll stay as House Democratic leader.

Actually, something else to consider: "Manchin resistance to clean energy provision could harm Biden's climate goals," from our Josh Siegel and Kelsey Tamborrino.

A VERY RELATED NOTE: All that talk about Poland, and it turned out that Hungary was the fork in the gears last week as the EU tried to push forward on implementing the minimum tax part of the global tax deal.

Hungary's last-second audible left French officials shaking their heads, after missing the final opportunity of their six-month presidency of the EU to spark some momentum for the tax agreement negotiated through the Organization for Economic Cooperation and Development.

In Brussels, Hungary's lone vote out of 27 against moving forward with the 15 percent minimum rate on corporations once again had officials calling to scrap the requirement that EU tax measures receive a unanimous vote to be approved, as our Giorgio Leali, Bjarke Smith-Meyer and Paola Tamma reported. (The minimum tax is the second pillar of the OECD agreement, while the first seeks to force multinationals to pay more taxes where they have customers and operations.)

But it's worth looking out for any spillover effect here in the U.S., too. Beefing up the U.S.'s existing minimum tax, known as GILTI (for the levy on Global Intangible Low-Taxed Income), has been a key priority for Treasury Secretary Janet Yellen, who played a key role in clinching the global tax deal last year.

Democrats have been looking to pull that off as part of a budget reconciliation measure, in order to get the U.S. more in line with the requirements of the OECD deal, and supporters have said that it would help the process here if the EU was moving forward with Pillar Two.

So stay tuned after the latest from Hungary. Some people closely watching the BBB talks say they'd be surprised if updating GILTI wasn't a part of a final deal, if one is struck.

Others are looking to see if Democrats might delay the effective date on any GILTI changes, because of the implementation problems elsewhere. And it's worth noting that Manchin has said throughout the BBB talks that he wants to ensure that American businesses remain competitive, even as he remains open to significant tax increases.

The very latest: Yellen herself said Monday that there would be a snowball effect , when countries start putting minimum taxes into place, as Reuters noted. When that happens, Yellen said in Toronto, "it'll begin to be more and more that see that it's in their interest to join up."

Around the World

CAN YOU GIVE US A HAND? The major lobbying group for manufacturers in the U.K. wants the government to stop playing around and cut taxes , Reuters reports. Make UK said the government needs to stop the "short-term gimmicks" that it's currently relying on to better help an industry facing higher costs from both materials and worker pay. The group also said that factory output this year is expected to grow less than projected a quarter ago — 2.3 percent, instead of 3 percent — and will fall even more next year. On top of that, the OECD believes that Great Britain's economy will grow at the slowest clip of any major economy outside Russia. The U.K. is also scheduled to raise its corporate tax next year, leading Make UK to call on the government to provide a year's cut in business property taxes, waivers on the value-added tax, smaller energy taxes and to keep a so-called super-deduction on investment.

Around the Nation

THIRD TIME NOT THE CHARM: Democratic lawmakers in Virginia have once more turned aside Gov. Glenn Youngkin's push for a gas tax holiday, The Associated Press reports. The state legislature considered the Republican governor's budget amendments late last week, after lawmakers sent Youngkin a compromise budget earlier this month. Youngkin didn't propose changing the budget provisions that offered tax relief to families and workers, but did push for a three-month gas tax holiday for a third time. One GOP senator joined Senate Democrats in defeating the proposed three-month suspension of Virginia's approximately 26-cent per gallon gas tax. Youngkin accused Democrats of failing "to put politics aside for the good of Virginians." But Democrats argued that a gas tax holiday would deprive the state of needed funding for infrastructure and transportation projects, while the benefits would largely go to out-of-state businesses.

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