Miller & Chevalier Chartered
CONTROL: The rubber hit the road: Senate Democrats announce $ 3.5 trillion package
July 22, 2021
Miller & Chevalier Chartered
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Last week, Senate Democrats, led by Senate Majority Leader Charles Schumer (D-NY), announced an agreement on a $ 3.5 trillion package that includes President Biden’s spending priorities, including proposals to ” social infrastructure ”with a focus on education, health care, childcare, paid family and sick leave and climate change. This package is expected to be considered under the budgetary voting rules and is separate from the bipartisan deal announced last month that focuses on traditional infrastructure like roads and bridges. The Senate plans to review the bipartisan agreement this week.
Details have not yet been outlined, but the $ 3.5 trillion package has been reported to be offset by healthcare savings and tax law reform. Based on President Biden’s recent proposals and general support from Democrats in Congress, taxes on the wealthy and a rise in the corporate tax rate are expected to be considered. In addition, the Democrats on the tax committees focused on international tax proposals related to Global Low Taxed Intangible Income (GILTI), Tax Reduction and Anti-Abuse (BEAT), Foreign Intangible Income (FDII), as well as a 15 percent minimum tax on global book income. All of these suggestions are likely on the menu of options to pay for the package.
While it remains to be determined how much tax revenue will need to be raised to offset the $ 3.5 trillion package, it is an important political calculation that President Biden and the Democratic Congress leadership must take into account when drafting these tax proposals the support of the moderate congress parties, in particular Senator Joe Manchin (D-WV) and Senator Kyrsten Sinema (D-AZ). As the package is expected to be examined under the budgetary voting rules, only a simple majority with all democratic votes is required for adoption. However, given the tight margins in the House of Representatives and especially the Senate (50-50), moderate Democrats will play a very important role in drawing up the tax proposals. Senator Manchin has already spoken out against President Biden’s proposal to raise the corporate tax rate to 28 percent and has instead spoken out in favor of a 25 percent rate.
It will be important to monitor positions of moderate Democrats, who are generally less supportive of tax hikes, as the $ 3.5 trillion package moves forward in the months ahead. Senator Manchin does not yet have a firm position on the package, but he has expressed his openness to reviewing the offsets. Support from moderate Democrats will be crucial in determining whether President Biden can win this legislative victory and bring it across the finish line. Stay tuned. #TaxTake
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On July 21, Loren will speak at the 11th annual NABE Transfer Pricing Symposium on the panel “Practitioners’ thoughts on the OECD COVID Transfer Pricing Guidelines”.
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