Build Back Better Act, the Electric Vehicle Tax Credit, and R&D in the United States
IRS News/Tax Policy:
December 10: Lawmakers demand answers on IRS backlog before next tax season
The IRS has been trying to catch up with the backlog of paper returns that began building up in storage trailers outside its facilities last year in the early days of the pandemic when IRS offices were closed to most employees.
The Biden administration has requested more funding for the IRS, but many of the same GOP lawmakers who are complaining about the backlog have also been resisting the extra funding, especially if the money goes toward increased enforcement and audits of taxpayers, which would bring in revenue for the administration's Build Back Better Act, which so far has attracted support only from Democrats.
"Despite a voluntary compliance rate of over 80% in the United States, the Biden administration has focused its advocacy efforts on securing mandatory funding for tens of thousands of additional IRS auditors and for provisions that would require financial institutions to transmit their customers' private, sensitive data to the IRS," the lawmakers wrote.
"Given the feedback, we are receiving from our constituents, it's clear that too little attention is focused on the first aspect of the IRS's stated mission: to 'provide America's taxpayers top-quality service by helping them understand and meet their tax responsibilities.'" The National Treasury Employees Union, which represents IRS employees, is supporting the increase in IRS funding and pointing out how necessary it is.
"The Build Back Better's focus on customer service will revolutionize the relationship between taxpayers and the IRS," NTEU national president Tony Reardon said in a statement Thursday.
"Having more tax professionals on hand with faster and better ways to communicate is essential to giving Americans the assurance that their tax return is handled accurately and fairly." The Build Back Better Act would add $79 billion over the next decade for IRS taxpayer services, business systems modernization, operations support, and enforcement activities.
The Taxpayer First Act of 2019 included some funding the IRS to improve its technology and staffing, but the Build Back Better Act would offer more money to the IRS to help it deal with its customer service challenges, restoring staffing levels at Taxpayer Assistance Centers around the U.S, where taxpayers can make an appointment and meet with an IRS employee face-to-face.
Build Back Better Act/Spending Bill:
December 13: GOP Plans To Target BBB Act's Long-Term Cost To Scuttle Bill
Congressional Republicans plan to focus on inflation and the potential cost of long-term extensions of temporary tax breaks as they try to push back against the revised Senate version of President Joe Biden's signature Build Back Better Act.
Sen. Lindsey Graham, R-S.C., ranking member on the Senate Budget Committee, said the GOP would argue the cumulative cost of the bill and potential extensions of temporary tax breaks and other items would add to the deficit and fuel inflation.
In addition to putting a spotlight on inflation, Rep. Tom Rice, R-S.C., a member of the Ways and Means Committee, said Republicans would attack the BBB Act as the vehicle for a costly tax break for wealthy individuals: a restructuring of the $10,000 cap on state and local tax deductions.
The congressional Joint Committee on Taxation found the BBB Act's plan to set an $80,000 SALT deduction cap through 2030 and temporarily restore the current $10,000 cap for one year in 2031 would raise $14.7 billion over 10 years.
Some lawmakers have said they would look for revenue-raising measures to cover the cost of future efforts to ease the SALT cap and continue other items in the BBB Act, including a one-year extension of the expanded child tax credit in the American Rescue Plan Act.
A 1,180-page draft of the Senate Finance Committee's portion of the BBB Act released over the weekend included a blank section, which was described in the text as a "Placeholder for compromise on the deduction for state and local taxes." Sen. Bob Menendez, D-N.J., a member of the Finance Committee, said he was pushing for a plan to curb benefits of the more generous SALT cap for those earning more than $550,000.
GOP Plans To Target BBB Act's Long-Term Cost To Scuttle Bill, But Senate Budget Committee Chair Bernie Sanders, I-Vt., has argued for a more ambitious plan to curb access to the enlarged SALT cap for those above an income threshold of $400,000.
Besides the SALT cap, revenue-raising proposals in the BBB Act remain under scrutiny, including proposals for a 15% alternative minimum tax for large corporations, a 1% excise tax on corporate stock buybacks, and surtaxes for wealthy individuals.
December 13: Manchin Casts Doubt on Quick Vote on Biden’s Social Policy Bill
Senator Joe Manchin III of West Virginia, the most prominent Democratic holdout on President Biden's $2.2 trillion social safety net, climate and tax bill, cast fresh doubt on Monday on his party's plans to speed the measure through the Senate before Christmas, saying he still had grave concerns about how it would affect the economy.
Mr. Manchin outlined his skepticism before speaking by telephone about the bill with Mr. Biden, a discussion that aides to both later characterized as positive.
In a 50-50 Senate where Democrats would need all of their party's votes to push through the legislation over unanimous Republican opposition, Mr. Manchin's reluctance to embrace it has helped freeze the measure in place.
"People have been in a hurry for a long time to do something, but I think, basically, we're seeing things unfold that allows us to prepare better," Mr. Manchin told reporters outside his Capitol Hill office on Monday, before the conversation with Mr. Biden.
Senator Mitch McConnell of Kentucky, the minority leader, has repeatedly said he prays for both Mr. Manchin and Senator Kyrsten Sinema of Arizona, another key Democratic holdout.
"The one-two punch of the C.B.O. score, showing the bill to be much more expensive, and record-high inflation after 40 years, I think will give Senator Manchin great pause," said Senator Lindsey Graham of South Carolina, the top Republican on the Budget Committee, adding that he had personally spoken to Mr. Manchin about the analysis.
Mr. Manchin called the report "Very sobering" and said he would discuss it with Mr. Biden.
December 13: Conservative group targets Tester, Sinema, Kelly
A conservative group is partnering with Republican governors to pressure Democratic senators to oppose President Biden's Build Back Better agenda.
The Coalition to Protect American Workers, led by Marc Short, former chief of staff to then-Vice President Mike Pence, is hosting events in Arizona and Montana starting this week, according to a release first obtained by The Hill. "The event will bring together business leaders in the community to discuss how President Biden's economic policies have hampered their business growth," the group said in the release.
The organization has another event planned at the start of 2022 in Montana with Gov. Greg Gianforte (R). The events underscore efforts from conservatives to urge red state and purple state Democrats to buck the party and oppose Biden's signature legislative initiative as negotiations continue in the Senate.
Kelly, who is up for reelection in 2022, and Sinema are broadly expected to back the Biden measure, though Sinema at times has been a difficult sell, and has taken part in numerous meetings with White House officials as they seek to win her support for the roughly $2 trillion social and climate spending bill. Tester is up for reelection in 2024, and conservatives are working to persuade him not to support the Build Back Better legislation.
The events alongside governors are the latest bid from The Coalition to Protect American Workers to try to sway Democrats away from voting in favor of the bill.
The group previously spent $800,000 on ads in West Virginia to express support for Manchin, who has voiced skepticism about the need to move forward with the bill amid concerns about inflation.
December 10: Economists call on Congress to 'swiftly' pass sweeping climate and social policy bill
More than 50 economists have signed on to a new letter calling on Congress to "Swiftly" pass President Biden's sweeping climate and social policy bill, arguing that it would alleviate some of the pressures of inflation by lowering health care and other costs for families.
"Congress can alleviate some of the strain caused by inflation by passing the Build Back Better Act, which will lower everyday costs for families, including child care, health care, utility bills, prescription drugs, and education," states the letter, a copy of which was obtained by The Hill ahead of its release.
"Overall, the Build Back Better Act will foster a more equitable, sustainable economy by creating millions of jobs, lowering costs, and cutting taxes for American families. We urge Congress to swiftly pass this critical legislation into law," the letter continues.
Economists say inflation has been driven by the pandemic, though some say the $1.9 trillion coronavirus relief law passed this year is partially to blame.
The letter echoes the White House's argument that Democrats' roughly $2 trillion climate and social spending legislation, which passed the House ahead of Thanksgiving break, would lower costs for middle-class families because of the extension of the expanded child tax credit, funding to expand access to child care and other provisions.
Manchin has raised ongoing concerns about inflation and warned Democrats against rushing to pass the package as recently as Tuesday.
"We are quite confident that if the question is, what can we do to address the costs that are most pressing to American families, that if that is the debate and that is the discussion, then the case for the Build Back Better Act only gets stronger and that we are building momentum around that set of arguments," White House National Economic Council Director told reporters during a briefing Thursday.
Global Trade:
December 9: US to tighten restrictions on exports of malicious cyber tools
The Biden administration is expected to announce on Friday an initiative to tighten rules surrounding the exports of certain technologies that have been used by authoritarian governments and bad actors for repression.
The move comes on the heels of the administration's sanctioning of the private Israeli spy-ware company NSO Group in November for "Malicious cyber activities."
A senior administration official said the Export Controls and Human Rights Initiative is an outgrowth of the sanctions targeting NSO and other private groups whose "End users are using" such technology to violate human rights.
The initiative expected to be announced on Friday will establish standards around export controls on these types of dual-use technologies in the form of a "Nonbinding code of conduct," guidance for how governments handle such licenses for exports.
Israel on Monday announced it would tighten restrictions on cyber exports, in the wake of the controversy over NSO. The focus will be on better monitoring and, if necessary, restricting the proliferation of such technology.
Over time, the administration hopes to expand the circle of involved governments and work through regulations and laws to make sure such technology is "Used for good and not for ill," the official said.
In parallel, the State Department is providing up to $4 million to establish a Multilateral Surge and Sustain Fund for Anti-Censorship Technology, to counter authoritarian censorship of the internet.
December 8: House passes bill to strengthen shipping supply chain
The House on Wednesday passed a bipartisan-backed bill designed to strengthen shipping supply chains, as ongoing infrastructure issues continue to exacerbate inflation and slow the economic recovery. The Ocean Shipping Reform Act was passed in the House in a 364-60 vote.
Under the legislation, shipping carriers and port operators are barred from retaliating against a shipper, a shipper's agent, or a motor carrier by threatening to withhold available cargo space.
The passage of this bill comes about one month after the House passed the Build Back Better Act, which included $5 billion for identifying and resolving supply chain issues that threaten economic security. Last week, a group of more than 20 House Democrats called for further legislation addressing supply chain issues to be passed.
"I'm pleased that House leadership heeded my call for additional legislative action that tackles the wide range of challenges posed by supply chain disruptions," Representative Axne said Wednesday evening, lambasting foreign shipping companies for "Squeezing Iowa farmers."
"This legislation works to address unfair shipping practices by tackling the worst instances of abuse from bad actors in the shipping industry in an effort to boost our country's global competitiveness," Rep. Kurt Schrader, a member of the coalition, said in a statement.
Environmental:
December 13: Updated reconciliation text includes electric vehicle tax credit opposed by Manchin
Preliminary Senate Finance Committee text for the social spending and climate bill released over the weekend retains a tax credit for union-made electric vehicles, despite objections to the provision by Sen. Manchin. The preliminary text released by Chairman Ron Wyden includes a $4,500 credit for electric vehicles domestically produced in unionized facilities.
The same provision was included in the House version of the bill passed in November. The text is not final and has not been submitted to the Senate parliamentarian. The text released by the Finance Committee also retains a provision from the House bill that would increase tax incentives for use of carbon-capture technology, bringing it from $50 to $85 per ton of carbon pulled.
Manchin, an essential vote in the 50-50 upper chamber, has spoken out against the tax credit for union-made electric vehicles in recent weeks, saying at a Toyota event in November that Congress "Shouldn't use everyone's tax dollars to pick winners and losers." However, the inclusion of the provision in the early text suggests that Wyden, one of the chamber's climate hawks, will at least attempt to include the tax credit in the final Senate bill.
As recently as Dec. 1, Sen. Debbie Stabenow (D-Mich.), another backer of the provision, told reporters negotiations over the credit were ongoing. Several other Senate panels are expected to release their own newest versions of the text in the days ahead, including the Environment and Public Works and the Energy and Natural Resources committees.
December 8: Biden Orders Federal Agencies To Cut Greenhouse Gas Emissions, By Expanding Electric Vehicle Fleet
The Biden administration announced Wednesday it aims to buy its way to a cleaner, cooler planet, spending billions to create a federal fleet of electric vehicles, upgrade federal buildings and change how the government buys electricity.
The executive order President Biden signed leverages Washington's buying power to cut the government's carbon emissions 65 percent by the end of the decade. The order also instructs the government to launch a "Buy Clean" initiative, prioritizing products produced and transported with low greenhouse gas emissions.
The new executive order alludes to this stumbling block, calling for the federal government to stop buying gas-powered passenger cars by 2027 but postponing the federal fleet's complete transition from fossil fuels by another eight years.
While the infrastructure bill Biden signed into law last month contains $7.5 billion to build a network of electric vehicle chargers, other aspects of the administration's plan may be constrained by agency budget allocations. Burning fossil fuels to heat and cool buildings in the United States produces nearly a third of the nation's greenhouse gas emissions. Biden's directive builds off an executive order Obama signed in 2015 setting a goal of cutting the federal government's emissions by 40 percent over 10 years.
Research and Development in the United States:
This story is common across the history of technological progress. Individual businesses often can’t afford to spend much on basic scientific research. Its outcomes are too uncertain for any one company to know which research will be profitable. In many cases, research that seems likely to benefit one industry ends up benefiting a different one.
Only the federal government tends to have the resources to make these investments. After it does, private companies then use its fruits to develop innovative and profitable products, spurring economic growth and tax revenues that comfortably cover the cost of the original research.
The Defense Department built the original internet — and Google, Microsoft, Amazon, and others expanded it. The National Institutes of Health-funded laboratory experiments — and pharmaceutical companies created treatments based on them, including for Covid-19. There are similar stories in energy, automobiles, aviation, and other industries.
In recent decades, however, American investment in research and development has lagged.
The U.S. now spends a smaller share of national output on research and development than many other countries. China is notably ambitious in this area, essentially copying the American strategy for building a strong economy, even as the U.S. has abandoned that strategy.
In The Wall Street Journal this week, Graham Allison, a Harvard professor, and Eric Schmidt, the former C.E.O. of Google, wrote, “In each of the foundational technologies of the 21st century — artificial intelligence, semiconductors, 5G wireless, quantum information science, biotechnology, and green energy — China could soon be the global leader.”
The semiconductor industry is a particularly good case study. U.S. companies like Fairchild and Texas Instruments initially dominated, followed in later decades by Intel. But the U.S. semiconductor industry has fallen behind (as Thomas Friedman has explained). U.S. companies make about 12 percent of the world’s semiconductors, down from 37 percent in 1990.
In June, the Senate passed a bill that would help make that happen. It would spend almost $250 billion over five years on research and development, including $52 billion for semiconductor makers. The main purpose is to keep the U.S. from falling behind China.
Overall, the bill would increase federal research and development spending by more than 30 percent. It passed along bipartisan lines, 68 to 32, and President Biden supports it.
But the House has not yet passed a version of it and appears unlikely to do so before recessing for the year. House Democrats have specific concerns about the Senate bill, as The Times’s Catie Edmondson has reported. Among them: whether it spends enough money on early-stage research — and too much money on de facto subsidies for private companies like Blue Origin, Jeff Bezos’ space company.
These are reasonable questions to raise. Still, many economists, governors, and industry executives are disappointed that the House and the Senate have not figured out how to resolve relatively minor differences and expand federal support of scientific research. “Candidly, it should have passed the House a while back,” Representative Ro Khanna, a California Democrat, said this week. “It’s been too slow.”
Debt-Ceiling:
December 14: Democrats Prepare to Raise Debt Ceiling
Democrats prepared Tuesday to raise the government's borrowing limit by $2.5 trillion, moving to quickly pass the measure through both houses of Congress and push the next debt-ceiling standoff past the midterm elections.
Lawmakers expect the $2.5 trillion increase to the roughly $29 trillion in debt will allow enough borrowing to pay the country's bills into 2023 when Congress would again have to act on the issue to avert default.
December 9: 14 GOP senators help advance McConnell debt limit deal
Fourteen Senate Republicans on Thursday helped advance a deal negotiated by Senate Minority Leader to set up a one-time exemption to the filibuster on raising the debt ceiling. Though leadership had expressed public confidence for days they would be able to deliver at least 10 GOP votes, the deal, negotiated by McConnell and Senate Majority Leader sparked fresh divisions among Senate Republicans just two months after a bruising fight over a short-term debt hike.
Republican senators launched a last-ditch effort to effectively squash the deal by trying to separate the rules setting up the simple-majority debt ceiling vote.
Part of the kvetch for Republicans is a concern the strategy effectively puts them in a lose-lose position: They are loath to be viewed as helping Democrats raise the debt ceiling but they also know that voting "No" on Thursday could open the door for future attack ads characterizing them as voting to cut Medicare.
“Americans may be poorer since President Biden took office but they are not stupid. They look around Washington, D.C., and they see liars and they see frauds in every direction,” Kennedy said. "A deal has been made to give us a choice between voting for a heart attack or cancer. You either have to give your principles on the debt limit or you have to cut Medicare and hurt our farmers and no one wants to do that," he added.
McConnell appeared to have the 10 votes he needed locked down by Wednesday night when Tillis, Burr, and Portman each indicated that they would join the group of Republicans to help the agreement get over Thursday's procedural hurdle.
GOP leadership views the deal as a win because it sets up a vote where Democrats will raise the debt ceiling on their own, includes a fast-track process, and requires that Democrats raise the debt limit to a specific number rather than suspending it to a date.
For Fun:
December 14: Pfizer Confirms COVID Pill's Results, Potency Versus Omicron
Pfizer said Tuesday that its experimental pill to treat COVID-19 appears effective against the omicron variant. The company also said full results of its 2,250-person study confirmed the pill's promising early results against the virus: The drug reduced combined hospitalizations and deaths by about 89% among high-risk adults when taken shortly after initial COVID-19 symptoms.
Separate laboratory testing shows the drug retains its potency against the omicron variant, the company announced, as many experts had predicted. Pfizer tested the antiviral drug against a man-made version of a key protein that omicron uses to reproduce itself. The Food and Drug Administration is expected to soon rule on whether to authorize Pfizer's pill and a competing pill from Merck, which was submitted to regulators several weeks earlier.
Pfizer is also studying its pill in lower-risk adults - including a subset who are vaccinated - but reported mixed data for that group on Tuesday. An independent board of medical experts reviewed the data and recommended Pfizer continue the study to get the full results before proceeding further with regulators.