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Reconciliation talks continue in the Senate

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Tax Hot Topics newsletter More than two weeks after the House passed its $1.7 trillion reconciliation package, there has been little progress on the bill in the Senate. Sen. Joe Manchin, D-W.Va., remains insistent that he will not back a paid family and medical leave provision backed by progressives, while also raising numerous other issues with the bill—including the impact to the deficit, drug pricing proposals, and the electrical vehicle credit. Manchin has also expressed significant concerns with inflation, and he could use the recent bad numbers on inflation to push for shrinking the bill significantly, pause consideration of the bill, or kill the bill altogether.

In addition, several Senate Democrats are also still negotiating relief from the cap on state and local tax deductions. The House-passed bill would raise the cap to $80,000 but extend it beyond its current expiration in 2026 through 2031 (lowering the cap back to $10,000 in 2031). Senate Budget Committee Chair Bernie Sanders, I-Vt., and Senate Finance Committee member Robert Menendez, D-N.J., have instead proposed repealing the SALT cap for families making under a certain threshold, while making the current $10,000 cap permanent above that threshold. That proposed threshold is still being debated, however, as Sanders prefers a threshold of around $400,000, while Menendez appears to prefer a number closer to $550,000 for individuals or $1 million for married couples.

Timing also remains a key concern for Democrats, as the goal—though not the technical requirement—has been to pass the reconciliation bill before Congress leaves for its holiday recess, currently scheduled to begin on Dec. 17 (though that date may be delayed). Further complicating reconciliation talks are additional governmental concerns—most notably, the debt ceiling, which the Treasury Department estimates will be reached on Dec. 15.

When asked recently about the timing of the reconciliation bill, Manchin responded, “I don’t control the clock. [Senate Majority Leader Chuck Schumer, D-N.Y.] has to make a decision about what he wants to do.”

While the bill is unlikely to pass in its current form, it is still by no means dead. Taxpayers should examine the provisions in detail to determine the potential effect.

Contact:
Dustin Stamper
Managing Director
Washington National Tax Office
T +1 202 861 4144

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