Biden Speech, Congress’ 2021 Legislative Agenda Pose Many Challenges
Per legislation already introduced, and in light of President Biden’s April 28 address to a joint session of Congress, it appears that there will be many challenges for NAIFA members this year. Among them are multiple adverse tax proposals, the PRO Act with its worker classification provisions, and a national paid leave initiative.
The second of two planned Build Back Better proposals, the $1.8 trillion American Families Plan (AFP), was released on April 28. It focuses on what the President is calling “human infrastructure.” It proposes paid leave, childcare, education, and other “human infrastructure” programs. The AFP’s proposed offsets come from individual tax hikes. They include:
- A hike in the capital gains rate for those earning $1 million or more in a year to 39.6 percent.
- A repeal of step-up in basis—which likely includes a rule that would characterize transfer as a result of death as a taxable event.
- An increase in the top individual income tax rate to 39.6 percent.
The first Build Back Better proposal, the $2.5 trillion American Jobs Act (AJP), focuses on traditional infrastructure spending (road, rail, port, bridge projects, etc.), paid for by proposed corporate tax increases. A key offset proposal would raise the corporate tax rate from 21 percent to 28 percent. The AJP, released this past March, also includes a new corporate minimum tax and proposed changes in international tax rules.
The AJP also includes a call to Congress to enact the PRO Act, which contains a worker classification rule that could prove adverse to most NAIFA members. (Generally, the PRO Act worker classification provisions would force recharacterization of many insurance agents and financial advisors as employees rather than as independent contractors.) The AJP also includes provisions to expand broadband and to improve senior caregiver jobs.
Neither the AJP nor the AFP has yet been put into legislative language and may not be. Instead, it appears likely that the relevant Congressional committees will write the actual legislation, which will reflect the (potentially many) changes to the proposals that lawmakers appear convinced need to be made.
President Biden says his Build Back Better agenda (both the AJP and the AFP, and their offset packages) is open to negotiation. Changes to it “are certain,” he said. He says he is open to alternative ways to pay for the cost of the infrastructure projects contained in his AJP proposal, but not to making it materially smaller. The President has been crisscrossing the country to tout the AJP and the AFP, saying that the plans are needed to rebuild the pandemic-ravaged economy and to create more and better jobs for America’s workforce.
Currently, there are bipartisan negotiations underway on the AJP—Congressional Republicans have crafted a $560 billion traditional infrastructure proposal paid for by “participants” in the projects to be authorized—revenue offsets include things like a miles-traveled fee, a gas tax, and unspent coronavirus aid law funds. Generally, Democrats and the President are insisting on a larger package and are arguing in favor of the corporate tax increases contained in the President’s AJP.
As of now, there is no visible path to a compromise on the AJP—virtually every Republican lawmaker opposes the AJP’s tax increase proposals, and most also want an infrastructure package significantly smaller than the one proposed by President Biden. Democrats want more, both in the size and scope of the infrastructure portion. There aren’t even serious conversations on the AFP—the GOP says the education, childcare, paid leave and other “human infrastructure” proposals in the AFP are a Democratic “socialist” agenda, and they are united in opposition to it. Most Democrats support it, although many want changes to it.
Hearings on the Build Back Better agenda are underway—on May 12, the House Ways & Means Committee’s Subcommittee on Select Revenue Measures held a hearing on how and why “the rich” should pay more taxes. Lawmakers say they will try to forge a bipartisan agreement—or at least make good progress on one—by Memorial Day. After that, they say, they will look to using a process that will sidestep the Senate’s rules that require a 60-vote majority to advance a bill (probably a reconciliation bill, but filibuster reform has not been ruled out).
If Democrats move to a partisan process, they will have to forge consensus among their own ranks. And in this closely divided Congress, that is almost as tall an order as a bipartisan agreement would be. In the Senate, all 50 Democrats would have to agree to support a bill. In the House, only four Democrats saying “no” would scuttle the effort.
Prospects: The Build Back Better initiative is at the top of President Biden’s priority list. And it is something most Democrats strongly support. Accordingly, it would be foolish to bet against the Democrats finding a way—whether it be bipartisan or solely among themselves—to enact it. But it is full of proposals that are controversial even among Democrats, and it is hard to see the contours of an agreement that could win all 50 Senate Democratic and all but three House Democratic votes. And it will take quite some time, with many new (and probably adverse) tax proposals emerging from the process.
NAIFA Staff Contacts: Diane Boyle – Senior Vice President – Government Relations, at dboyle@naifa.org; Judi Carsrud – Assistant Vice President – Government Relations, at jcarsrud@naifa.org; or Michael Hedge – Director – Government Relations, at mhedge@naifa.org