sen. Joe Manchin (D-WV) is finally on board with a budget reconciliation bill. But just because Democratic leadership and President Biden have passed their biggest hurdle doesn’t mean there aren’t others.
This week, Manchin announced that he would support the Inflation Reduction Act of 2022, which includes major climate, health and tax policy reforms. It’s notable for being the most vocal proponent of Build Back Better, the previous incarnation of legislation that addresses these issues.
But there are still some unresolved issues that could affect the bill’s provisions or jeopardize its chances of being passed at all. Making sure there are enough Democrats behind it is a major concern in both the House and Senate. And the tight time frame that legislators must approve before the recess also poses a challenge.
The future of the bill hinges on three big questions:
1) Will Senator Kyrsten Sinema support it?
Besides Manchin, Senator Kyrsten Sinema (D-AZ) was the other big supporter in the Senate on Build Back Better, and she hasn’t said where she stands on the Inflation Reduction Act yet.
She previously opposed closing the interest tax loophole — a key provision of the Inflation Reduction Act — and it’s possible that could be another sticking point.
Closing the loophole would force money managers to pay the same tax rate on their fees as other professions. Currently, their income can be taxed at a lower rate of up to 23.8 percent, while income is typically taxed up to 37 percent. Eliminating the loophole was a central objective of Manchin. And this new proposal is also a critical part of how the bill will reduce the deficit, which is something else that Manchin is very concerned about. If Sinema’s position remains unchanged, she would be in direct opposition to Manchin.
Sinema spokesperson Hannah Hurley told Bloomberg that the senator was still reviewing the bill and would wait to see what came out of the Senate MP’s review. Manchin, meanwhile, has repeatedly said he is interested in keeping the carry-rate provision in the bill.
Earlier, corporate and individual tax rate increases were removed from the House Build Back Better law due to Sinema’s opposition.
2) What about house moderates?
The Democratic House moderates are another contingent that may be disappointed by this iteration of the bill.
Earlier, several moderate members, including Rep. Josh Gottheimer (D-NJ), called for the full state and local tax deduction (SALT) — currently limited to $10,000 — to be added back to the bill. In the past, there was no limit on this deduction, meaning people could pay lower federal income taxes because they could deduct their higher state and local taxes from their federal bill.
The right primarily benefited homeowners and other, usually more affluent, Americans with higher state and local tax burdens, leading many Democrats to oppose its return. These Democrats argued that it was essentially a tax break for the wealthy. As Manchin noted in a statement Wednesday, he also opposes the inclusion of this provision and is not included in the bill as is.
On Thursday, some members who previously pushed for the SALT deduction, including Representatives Tom Suozzi and Tom Malinowski, signaled that they would still support the legislation despite this omission. Other moderates — such as Gottheimer — have yet to take an explicit stance.
The overwhelming majority of moderate support is ultimately crucial to the bill’s approval in the House, where Democrats have only a slim majority. After the recess, the party will probably have a margin of only three votes in the House of Representatives.
Progressives, meanwhile, have generally sounded optimistic about the bill, although it’s much more restrictive than what Democrats had originally hoped. “If we can pull it off, and I believe we can, I believe there’s a real deal here,” said Rep. Pramila Jayapal (D-WA), the president of the Congressional Progressive Caucus, said in a CNN interview on Thursday.
3) Could the vote fail again?
The final uncertainty plaguing the bill is simply logistics. Because the Senate will skip the city for the lawmakers’ annual summer recess on Aug. 5, there is only one week left for Democrats to pass the bill before they leave.
That’s not much time, and it’s further complicated by a recent surge in Covid-19 cases in Congress, which prevents members from being in person at the Capitol to cast their votes.
Over the past week, multiple lawmakers have tested positive for Covid-19, including Manchin and Senator Dick Durbin (D-IL), who announced his result on Thursday. Durbin will likely be back on the hill in time to vote for this legislation, but it’s possible other lawmakers could test positive as well.
That’s a problem for Democrats, because they need every vote from their 50-member caucus, plus the vote of Vice President Kamala Harris, to pass the simple majority threshold needed to pass a bill. approved by budget coordination. Since no Republican is expected to support this legislation, the entire caucus must attend in person.
The reconciliation process is another problem. Between now and the vote, Democrats will have to wait for the Senate MP’s ruling, which will determine whether the provisions in the bill are sufficiently related to taxes and spending to be considered part of the budget reconciliation. According to Bloomberg, that review is expected to happen next week, as the bill is more than 700 pages. If they fail to get MP’s approval for certain measures, Democrats will have to amend their bill and possibly remove some provisions. If they succeed, they can move the bill forward, but they will also have to go through a lengthy process known as a “vote-a-rama,” when senators can table amendments.
Democrats always have the option to cancel or shorten the August recess if necessary, although lawmakers typically don’t consider this option. If Democrats can’t vote for the recess on the Inflation Reduction Act, and they don’t hang around any longer, a vote on the bill could take place this fall. Any delays would also affect the timing of a vote in the House, which is likely to take place in August if things go according to plan next week.