Are The “Build Back Better” Taxes Lurking?
By Beckett Cantley 1 & Geoffrey Dietrich 2
On March 10, 2022, the U.S. Senate voted 68-31 to pass the Fiscal Year (FY) 2022 omnibus appropriations bill, the Consolidated Appropriations Act of 2022 ( H.R. 2471 , hereafter, the “Omnibus Bill”), providing $1.5 trillion in federal discretionary spending across all 12 appropriations bills. The passage of this massive stop-gap spending bill averts the shutdown of the government until the end of September and was accompanied by the usual fanfare and much Congressional high-fiving—The Wall Street Journal quipped that one might think “it was the 1964 Civil Rights Act … for all the self-congratulation.” 3
Conspicuously absent from the Omnibus Bill’s 2,700 pages are any tax provisions that would normally be part of such omnibus spending (and most legislation) to pay for the new spending provisions in the Omnibus Bill. This article briefly discusses the tax provisions from the Build Back Better Act (“BBB Act”) that Congress failed to pass earlier this year and analyzes what the absence of these tax provisions in the Omnibus Bill means and whether their absence is just a delayed reprieve for U.S. taxpayers.
What was in the Biden Administration’s Proposed BBB Act Tax Changes?
The Biden Administration entered office riding promises of increased taxation against wealthy Americans and businesses. We looked at several key tax provisions in depth in our article, “ Uncovering Four Ways that Biden’s American Families Plan Attacks Your Wealth ,” passage of which would have reconfigured wealth and provided a host of social programs.
The BBB Act contained numerous tax provisions that theoretically would have increased tax revenue to fund a significant number of spending programs as well as continued COVID-19 pandemic-related expenditures. According to the White House’s “Build Back Better Framework” these ambitious goals were “fully paid for” through the following tax provisions:
- the repeal of most of the Trump Administration’s tax cuts;
- increasing corporate income taxes, including taxes on global income of corporations while penalizing corporations that hire and produce overseas;
- increasing taxes on everyone making more than $400,000 annually (Married Filing Jointly); and
- increasing tax enforcement by providing $80 billion in funding to the IRS. 4
The BBB Act died earlier this year when Senator Joe Manchin (D-W.Va.) voted against the new legislation. Sen. Manchin determined that the $2 trillion price tag was excessive spending that would lead to increased inflation in the U.S. economy. Amazingly, after gnashing teeth and screaming about fraud and waste over the $2 trillion in the BBB Act, enough Republicans voted with Sen. Manchin and the Democrat majority to pass the $1.5 trillion Omnibus Act which contained a government spending spree that came just half a trillion shy of the original goal.
How Congress Uses Omnibus Spending
As the legislative branch of the government, Congress is granted the “power of the purse” under Article I of the Constitution. 5 As the federal government has grown in prominence or bloat, the amount of internal funding required to be appropriated by Congress to specific agencies, departments and programs within the federal government has grown quite massive. 6 When you have pennies, dimes sound like a lot. Once you’ve earned a couple quarters, those pennies seem worthless. Once Congress warmed up to the idea of spending a cool trillion, how can we ever go back to mere billions? Looking back, we just can’t seem to fund the government for less anymore.
Congress approves funding to the various departments, agencies, and programs in the federal budget through appropriations bills. Although everyone knows there are twelve different appropriations bills—one for each Congressional sub-committee—that need to be passed each year, Congress sometimes struggles to produce and approve each of the twelve appropriations individually.
The term “omnibus” denotes a spending bill which packages two or more of the individual appropriations bills into one. Disagreement over spending and packages leads to difficulty approving an individual appropriation on the merits. To shortcut the process and obtain buy-in, members of Congress will engage in “buying” the votes needed for an omnibus package. Since the 1980’s both sides of the aisle have used omnibus packages because “party and committee leaders can package or bury controversial provisions in one massive bill to be voted up or down.” 7
According to Senate Majority Leader Chuck Schumer (D., N.Y.), “This funding bill is awash with good news for our country.” 8 Just over half goes to defense spending and the remainder (a mere $730 billion) goes to non-defense spending, including $13.6 billion in humanitarian assistance to Ukraine. The Ukraine spending was the lever that pushed the Omnibus Bill through.
While it would prove both enlightening and enraging to list all the separate pork projects included in the Omnibus Bill, we choose to focus on what is conspicuously absent from the Omnibus Bill: tax provisions.
One of the BBB Act’s hallmark provisions was increased funding (to the tune of $80 billion) to the IRS as a blank check to focus on enforcement and chasing down corporations and wealthy people. We will discuss in a separate forthcoming article the increased IRS budget.
Peering Into the Tax Provision Future
Although we see an appropriate amount of handwringing by both sides of the aisle on the lack of tax provisions within the Omnibus Bill, the revenue raising void remains. Without tax provisions, the means for funding the entirety of this $1.5 trillion package falls on the existing funds (or credit) of the U.S. government. As we have seen, there is no shortage of money that can be printed, but with inflation at forty-year highs, that may not be the desired way out.
Pres. Biden has seen his previously “completely paid for” BBB Act halt and cannot possibly hope to resurrect his agenda without significant tax increases. If not in the Bill, where are they? The president will likely throw his declining weight toward including some tax items in future legislation, breaking what would have been incredible pain into more manageable—read, passable—chunks. Smaller bills that attempt to do less may be the path forward for many tax provisions in BBB Act. Only time will tell if Sen. Manchin and others will pay attention to the unaccounted-for costs attached to every future bill.
However, failing to pass the BBB Act prior to the confluence of bad luck, bad timing, and arguably bad policy leaves the Democrats in the unenviable position of facing Congressional elections in 2022 with eroding support. Even the mainstream media has started to admit Democrats are in trouble heading into this election cycle. Raising taxes before the mid-term elections with significant seats in jeopardy could very well prove strategically suicidal.
Additionally, despite the pipe dream that Sen. Manchin would ally himself with his Democrat colleagues, Manchin further indicated his independence of thought through his recent opposition to the Biden administration’s nominee for the Federal Reserve chair. 9
One of the most likely scenarios for the reappearance of tax provisions should the Democrats lose their majority in November, is Congress passing significant legislation during the lame-duck sessions. While lame-duck sessions were historically used to wrap up the business of Congress, the lame-duck session ending Jan. 3, 2021, was historic in that nearly 44% of bills passed by the 116th Congress occurred during the final two months of its term. 10
Could much of this Congress’ hoped-for legislation become a reality in the waning hours of its’ session? Arguably, yes. In the last fifty years, no other Congress has passed as much legislation as this one during that period. For a party moving out of power, it’s highly likely such a move would be used to push as much legislation through as possible.
Should that not be the case, the only route left to tax provision package occurs in the final year of Biden’s term. A difficult proposition as most election strategists predict that the GOP will likely take both houses in November. At this point, the GOP needs only to turn over one Democratic Senator seat and eleven Democratic House member seats with thirty-one Democrats having announced they will not seek reelection. 11 As such, if they do not pass legislation in a lame duck session, they will have no chance after the next Congress is seated.
4 The White House, Build Back Better Framework, (available at: https://www.whitehouse.gov/build-back-better/ , last accessed March 14, 2022).
5 Art. I, U.S. Const.
6 Jessica Tollestrup, The Congressional Appropriations Process: An Introduction, Congressional Research Service (February 23, 2012), https://sgp.fas.org/crs/misc/R42388.pdf last accessed March 14, 2022.
7 Oleszek, Walter J. (2007). Congressional Procedures and the Policy Process, p.34 CQ Press
8 Wall Street Journal, Siobhan Hughes & Teresa Mettela, Senate Passes $1.5 Trillion Spending Bill that Includes Aid for Ukraine, (Mar. 10, 2022) available at: https://www.wsj.com/articles/senate-democrats-see-ukraine-aid-speeding-passage-of-omnibus-spending-bill-11646935157
9 Andrew Ackerman & Andrew Duehren, Sen. Joe Manchin Signals Opposition to Sarah Bloom Raskin for Fed Post (available at: https://www.wsj.com/articles/sen-joe-manchin-signals-opposition-to-sarah-bloom-raskin-for-fed-post-11647275446?mod=Searchresults_pos3&page=1 , last accessed March 15, 2022).
10 Drew Desilver, Nothing lame about this lame duck: 116th Congress had busiest post-election session in recent history, Pew Research Center (Jan. 21, 2021(available at: https://www.pewresearch.org/fact-tank/2021/01/21/nothing-lame-about-this-lame-duck-116th-congress-had-busiest-post-election-session-in-recent-history/ , last accessed March 15, 2022).
11 In 2018, only 28 Republicans did not seek reelection and during that election lost forty-one seats.