Wyden releases a first draft of the Senate’s BBB tax provisions. It won’t be the last word, but Senate Finance Committee Chair Ron Wyden released an 1180-page legislative text of the tax provisions of Build Back Better (BBB). The bill closely tracks the House bill. But it excludes any state and local tax (SALT) deduction cap relief, exempts pension income from the House’s proposed “book” minimum tax, eases limits on corporate interest deductions, and drops a tax on vaping. At the same time, the measure toughens “anti-inversion” tax penalties on firms that are acquired by foreign businesses to reduce US tax liability. The Senate parliamentarian now will scrub the tax provisions bill to be sure they satisfy Senate budget reconciliation rules.
What would happen to the deficit if key provisions of Build Back Better were permanent? At the request of congressional Republicans, the Congressional Budget Office calculated the House version of BBB would add about $3 trillion to the deficit over 10 years if key provisions of the bill were made permanent, rather than phased-out. Extending the expanded Child Tax Credit would account for more than half the amount—about $1.6 trillion. The CBO estimate assumes Congress would not pay for any of the extensions once the House provisions expire.
CTC expansion, family leave… What’s a lawmaker to do? Without congressional action by Dec. 28, families will not receive monthly child tax credit payments in January. But Sen. Joe Manchin continues to urge Congress to delay action on BBB. Fellow Democrats also are pressuring Manchin to drop his opposition to paid four weeks of family and medical leave included in the House bill. Manchin says he wants that issue addressed in a separate bipartisan bill even though Republicans have shown no interest in supporting such a measure.
North Carolina’s new budget would cut taxes by over $13 billion. But there’s a tradeoff. Cutting the personal income tax rate from 5.25 percent to 4.99 percent next year and to 3.99 percent by 2027 would reduce funding for public schools and other government services. In addition to the personal income tax rate reductions, the budget also would eliminate the state’s corporate income tax by 2030.
Speaking of state budgets: Check out the State Tax and Economic Review for Quarter 2 of 2021. TPC’s Lucy Dadayan reports states experienced strong revenue growth in the second quarter compared to low revenues in 2020 due to the pandemic. Still, second quarter revenue growth was strong compared with the same quarter in 2019. Lucy warns that some underlying economic indicators remain worrisome: Some state unemployment rates are still higher than pre-pandemic levels; labor force participation remains subdued; and overall prices have risen substantially.
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