Yesterday, November 15th, President Biden signed into law the Infrastructure Investment and Jobs Act, also known as the Bipartisan Infrastructure Bill. While this bill was before congress, there was a push by many Democrats to concurrently pass the Build Back Better (BBB) plan. However, they were not successful and the vote for the BBB has not yet happened.
If you’ve been trying to keep up with this year-end congressional wrestling match and have ended up feeling a little confused, you’re not alone. The way these sweeping laws have been quickly morphing while the American people try to keep track of “what’s in and what’s out” is enough to give us all whiplash.
Even though it’s tough to keep up with what is changing in these behemoth bills as congress debates (unless you have time to watch C-SPAN non-stop), let’s tease out some of the important information about each of these pieces of legislature.
Since the Infrastructure Bill was signed into law yesterday, let’s start there.
According to Kathryn Watson and Sarah Lynch Baldwin from CBS News, “The bill includes $550 billion in new spending on the nation's physical infrastructure and has been praised by Mr. Biden as the largest investment in roads, bridges, ports, water and rail in decades. The measure provides $110 billion for roads, bridges and major projects, $39 billion for public transit and $66 billion for railways. It also provides $65 billion for broadband infrastructure deployment and $55 billion for clear water investments.”
The Infrastructure Bill has been touted as a means to help the US add jobs for blue-collar workers and get back on even-footing with China.
However, it also came with a hefty price tag: 1.2 trillion dollars.
Biden seems to hope that this bill will allow him to win back the hearts of the American people as his approval ratings have taken a nose-dive recently. This bill is also supposed to be fully paid for without really raising taxes on the American people by things like “saving $50 billion by delaying a Medicare rebate rule passed under former President Donald Trump and gaining $30 billion from strengthening tax reporting requirements and enforcement for cryptocurrency,” according to Nicole Goodkind of Fortune.
So with the roads, railways, broadband, and water taken care of without changing tax law (except those few items listed here, the most notable being cryptoasset reporting)- congress now moves on to the next bill:
The Build Back Better plan
The BBB would affect tax code in a much more substantial way and that’s why it didn’t pass with the Infrastructure Bill.
Forbes has a great article here that goes into detail about the Tax Policy Center's analysis of this bill. This analysis digs into how the proposed changes would affect American families. Essentially, taxes would go up very minimally for middle-income households in 2022, would change again in 2023, and by 2026 “every income group except those making about $28,000 or less would pay higher taxes on average in 2026 than under current law. However, the tax increases for middle income households would be very small…”
Now, with inflation surging more than it has in thirty years, it could mean disaster if the government passes a bill that isn’t going to have a firm “payment plan” in place.
Even some Democrats aren’t on board with the BBB because our country is in such a volatile state with inflation and debt. Senator Joe Manchin (D-W.Va.) has made headlines for his concerns over the spending in the Build Back Better Plan. CBS News reporters Jack Turman and Kathryn Watson quote Manchin in their article Machin calls Biden’s $1.75 trillion spending proposal a “shell game”:
“’As more of the real details outlined in the basic framework are released, what I see are shell games, budget gimmicks that make the real cost of the so-called $1.75 trillion bill estimated to be almost twice that amount, if the full time is run out, if you extended it permanently,’ Manchin told reporters Monday afternoon. ‘And that we haven't even spoken about. This is a recipe for economic crisis.’"
As it stands, moderates were able to get the Congressional Budget Office (CBO) involved and they are supposed to come out with a “complete cost estimate” by November 19th. Once this estimate is published, the House of Representatives will have their final vote and the bill would then move to the Senate which has a Democratic majority and the Majority Leader, Chuck Schumer, has already made it clear that this bill will be his priority and he hopes to have it passed before the end of the year.
We still don’t know what the final outcome to the tax provisions will be for the Build Back Better plan, but we'll know more once the CBO makes their report public.
However, one thing to celebrate in all of this is that a proposal to repeal the step-up basis (a decision that could have meant ruin to middle class Americans, farmers, and small businesses) was thrown out. At this time, we have to focus on the silver linings and that is certainly one of them.
As we learn more, we’ll do our best to keep you updated.