BBBA Comeback? President Biden’s first State of the Union address appears to have reignited discussions around a revised version of the Build Back Better Act (BBBA), though the president did not reference the legislation by name. During his address, President Biden pared back his priorities to include only a handful: drug pricing and health care reform, child care assistance, home- and community-based services, affordable housing and clean energy. Click here for a complete overview and analysis of the State of the Union address.

Following the address, Sen. Joe Manchin (D-WV) said he could accept spending on “climate” and left-over funds might go toward “social issues” in a renegotiated package. He said revenue should be raised through drug pricing reform and by amending the Tax Cuts and Jobs Act so that taxes are increased on high-income earners and corporations. Under Manchin’s proposal, half the revenue raised would be dedicated to deficit reduction. Manchin’s tax proposal will face roadblocks. Sen. Kyrsten Sinema (D-AZ) has previously opposed increases to the corporate rate. At the same time, however, Sinema has supported a corporate minimum tax for large corporations, a new surtax on individuals earning above $10 million and an excise tax on corporate stock buybacks. It is unclear if Manchin will support these provisions, but he acknowledged last week he will have to coordinate with Sinema, saying he is “happy to look at [Sinema’s proposals],” and adding that “Kyrsten is a really good friend.”

Senate Majority Leader Chuck Schumer (D-NY) sought to spur additional momentum on Monday when he sent a Dear Colleague letter that said Senate Democrats are prepared to move on legislation “to lower the rising cost of energy, prescription drugs and health care, and the costs of raising a family.” The letter also said Senate Democrats and Republicans are cooperating on bipartisan legislation to address insulin and meat prices.

Emergency Appropriations Week. Congress is again running up against a government funding deadline. The current continuing resolution (CR), which has retained Trump-era government funding, expires this Friday, March 11. Without passage of additional funding legislation, whether that be another CR or an omnibus, the government will be forced to shut down. This is unlikely to happen.

To avoid a shutdown, though, Congress must pass another CR or a $1.5 trillion omnibus, the latter of which is more likely. A short-term CR, which would be the fourth of the current fiscal year, could also be necessary, allowing lawmakers additional time to finalize and approve text.

In addition to finalizing last-minute issues on the omnibus, lawmakers are preparing supplemental spending language that would provide humanitarian, military and economic aid to Ukraine and replenish COVID-19 response programs that have been depleted. The tax components within each are explored in greater depth below:

  • COVID-19 Supplemental. The $15 billion COVID-19 supplemental request originally contained $29.7 million for Internal Revenue Service operations support for “conducting criminal investigations and enforcing criminal statutes related to violations of internal revenue laws and other financial crimes.” According to an explanation of the request, the funds would be used for “entity linking analysis, digital asset tracing, attribution of concealed efforts and identifying true beneficial ownership.”
  • Ukraine Supplemental. The $12 billion Ukraine assistance request contains $9.7 million for the Department of Justice Criminal and Tax Divisions to assist attorneys supporting “task forces with tax-specialists to ensure sanction evaders are prosecuted.”

Speaker Nancy Pelosi (D-CA) said in a Dear Colleague letter over the weekend that “the Congress intends to enact this emergency funding this week as part of our omnibus government funding legislation.” As of this writing, lawmakers hope to release the text on Tuesday and vote on the measure on Wednesday before House Democrats head to Philadelphia for a policy retreat. If the House is unable to approve the measure before then, they may have to return on Friday for a vote. As of this writing, the text had not yet been released, but it appears no tax title will be included.

The supplementals could run into Republican opposition, however. With respect to the COVID-19 supplemental, some Republicans have pushed against additional funding since “there’s a lot of unspent money” that has already been appropriated for COVID-19 programs, according to Senate Appropriations Committee Ranking Member Richard Shelby (R-AL). Similar concerns were also raised by Senate Minority Whip John Thune (R-SD), who said last week, “there’s going to be a lot of resistance on our side to” additional COVID-19 aid. That resistance materialized on Wednesday, March 2 when 36 Senate Republicans sent a letter to President Biden saying, “it is not yet clear why additional funding is needed.”

The Ukraine supplemental is likely to enjoy more widespread Republican support, although the package ran into early trouble over the source of Ukraine aid. Democrats originally proposed pulling the supplemental aid directly from Defense Department funding, which was met with resistance from Republicans.

Republicans Clash on Tax Agenda. Sen. Rick Scott (R-FL), a first-term senator who chairs the National Republican Senatorial Committee, released an 11-point plan in February that he says Republicans should pursue if they win the Senate majority next Congress. The so-called “Plan to Rescue America” contains multiple tax and budget provisions, including:

  • Requiring all Americans to pay some income tax, even a small amount, “to have skin in the game.”
  • Drastically simplifying the tax code, eliminating advantages for those who can afford tax lawyers.
  • Cutting IRS funding and workforce in half.
  • Prohibiting institutions of higher education from receiving federal funding and claiming tax-exempt status if they “favor or discriminate against students based on race or ethnicity in the application process.”
  • Prohibiting tax laws from rewarding people for being unmarried or discriminating against marriage.
  • Requiring federal assistance recipients to be disabled or “aggressively seeking work.”
  • Balancing the federal budget and prohibiting increases to the debt ceiling absent a declaration of war.

The impetus for the plan was a response to longstanding accusations from Democrats that Republicans have no positive legislative agenda—only efforts that undermine and obstruct the Democratic agenda. Scott hopes the plan will provide voters with a clearer understanding of what Republicans will do if they regain the majority in 2023.

The plan has been met with sharp criticism from Scott’s colleagues, including Senate Minority Leader Mitch McConnell (R-KY). McConnell, for instance, said last week to reporters: “let me tell you what will not be a part of our agenda: we will not have as part of our agenda a bill that raises taxes on half the American people and sunsets Social Security and Medicare after five years,” referring to part of Scott’s plan that would sunset all federal legislation after five years.

McConnell also responded to reports that former President Trump has been urging Scott to run as the Senate Republican leader next Congress. McConnell said, “If we’re fortunate enough to have the majority next year, I’ll be the majority leader.”

Other Republicans are concerned Scott’s plan could expose them to attacks in the midterm elections.

Sen. John Cornyn (R-TX), who is a top contender to replace McConnell when he leaves the Senate, said Scott’s plan “is not an approach embraced by the entire Republican conference.” Instead, Cornyn said the conference will keep its “focus on inflation, crime, the border and Afghanistan,” adding only that “some of these other things are things to think about … after the election is over.” For now, however, Senate Republican leadership reportedly has no alternative plan in the works.

In response, Scott published an opinion article in the Wall Street Journal last week defending his plan, saying, “Republicans and independents demand […] a plan to save our nation. They see no point in taking control of Congress if we are simply going to return to business as usual.” He specifically responded to opposition that has arisen against requiring all Americans to pay at least some income tax. Scott wrote that he is “a tax cutter—always have been, always will be,” adding that he wants “to require those who are able-bodied but won’t work to pay a small amount so we’re all in this together.”

Read the FULL “Build Back Better Act Comeback?” update from Brownstein Hyatt Farber Schreck.


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