Close
Close

Biden, Manchin outline parameters of new tax deal

RFP

Tax Hot Topics newsletter President Joe Biden and Sen. Joe Manchin, D-W.V., outlined similar priorities for a potential resurrection of key pieces of the failed Build Back Better package, but there are still many problems blocking a deal.

Biden’s State of the Union Address dropped any specific references to Build Back Better, but pitched a smaller package of health care changes, climate change initiatives such as tax credits, and pre-K funding paid for by tax increases. Biden also pledged to use some of the new revenue to reduce the deficit.

The platform aligns closely with the priorities laid out by Manchin, who responded by outlining a potential package that reforms the tax code and lowers the cost of prescription drugs if the money raised is split between spending on new climate change proposals and deficit reduction and fighting inflation, with leftover money for fully funded social programs. Manchin has supported pre-K funding. Manchin also dropped some of his process complaints, acknowledging that bipartisanship will not be possible on such legislation and they would have to use the reconciliation process.

There are still many hurdles that make any agreement difficult. Progressives may be hard pressed to accept any deal without the child tax credit, which remains a major sticking point for Manchin. It also may be difficult for progressives to dedicate revenue to deficit reduction instead of cherished spending priorities. Deficit reduction is a key part of Biden’s renewed pitch to Manchin, and is seen key to fighting inflation. Inflation is likely to remain an issue throughout reconciliation negotiations, as data released last week showed the Consumer Price Index (a key measure of inflation) increased 7.9% year-over-year through February 2022—its fastest rise in 40 years. Finally, Manchin and Sen. Kyrsten Sinema, D-Ariz., are at odds over the tax title. Sinema and Biden would like to retain the 15% minimum book tax and adjusted gross income surtax, while Manchin would like to bring back a corporate rate increase and a capital gains rate increase. With time running out until election season, a deal will be difficult.

Nevertheless, Senate Majority Leader Chuck Schumer, D-N.Y., intends to move forward with certain portions of Biden’s platform, as he recently stated. The Senate will soon begin hearings on prescription drug pricing, and Schumer noted that additional hearings on other proposals will be held in the coming weeks.

Updates on a slimmed-down reconciliation bill are expected throughout the next several months, as many Democrats—and the White House—will hope to enact a bill prior to the August recess.

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

Tax professional standards statement
This content supports Grant Thornton LLP’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the topics presented herein, we encourage you to contact us or an independent tax professional to discuss their potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this content may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this content is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.

The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.