The past two months have been among the most perplexing of my 47-year career as a CPA. Congress is battling with itself while trying to pass the Build Back Better legislation. It seems as though every time you exhale, the legislative provisions change.
The legislation is the centerpiece of President Joe Biden’s agenda. Plans calling for government spending of $3.5 trillion, largely offset by tax increases, suddenly seem to be a sequel to “Honey, I Shrunk the Kids” as the amounts diminish.
Some wonder whether the BBB will even pass. The bill is being advanced through the reconciliation process, which requires only a simple majority in the Senate. Achieving a majority in either House is a challenge.
After the House Ways and Means Committee released its first proposal in September, I spoke with several colleagues who are legislative analysts.
At that time, the consensus was an 80% chance of passage, with one advising that he thought you could flip a coin to determine whether the legislation would become reality.
After almost six weeks of daily discussions with professional colleagues about the bill, clearly there are situations where the bill may fail and where it may pass. A recent webcast by tax professionals at accounting giant Deloitte summarized the situation most coherently.
There are several scenarios under which BBB might fail. It is hard to tell if any will ultimately play out, but there are plausible possibilities.
The first is that, during negotiations, the BBB’s size continues to get smaller until the point where progressives will have had enough and will oppose the legislation as meaningless to their constituencies.
On the other hand, future negotiations favoring the progressives may restore some deleted provisions, causing moderates to oppose the bill because it is too expensive. The House and Senate have institutional rivalries and differing procedures that may make it difficult for both houses of Congress to agree.
The legislation may coincide with the need for Congress to raise the debt limit, which could result in the debt limit taking precedence.
The margins in both houses are so thin that other members of Congress could assume roles similar to those of Sens. Joe Manchin and Kyrsten Sinema.
But there also are equally credible scenarios where BBB could pass.
For example, moderate Democrats might not want to be blamed for defeating a bill that is considered crucial for the Biden presidency.
In a similar vein, progressives might be willing to accept incremental progress rather than try to resurrect the bill in the next session of Congress when the Republicans are likely to have control.
If raising the debt ceiling cannot be achieved because doing so cannot get 60 votes in the Senate, then it is likely that raising the debt ceiling would have to be accomplished using the reconciliation process, which requires only a simple majority.
Since the reconciliation process can only be used once per year, then raising the debt ceiling would have to be added to the BBB. If the debt ceiling is not raised, the financial repercussions would be severe and expanding the scope of BBB would be the best way to avert those consequences.
That opens a pathway for the BBB to pass.
I cannot remember when such consequential reform legislation has been considered by a Congress with such thin majorities in both houses. Whether you like her politics or not, House Speaker Nancy Pelosi has proven to be a master at getting legislation through Congress, as we have seen with Obamacare.
But she has never had to deal with razor-thin margins like this before.
The other question is, when will the bill be voted on? Unlike the House, the Senate cannot vote on a bill in the reconciliation process until the Congressional Budget Office has scored the bill. Scoring is a process whereby the CBO forecasts the both cost of expenditures and the amount of revenue raised. That process will probably take at least two weeks.
Once the provisions are scored, Sens. Manchin and Sinema (and perhaps others) are likely to weigh in, causing further delays and changes.
Once the bill has passed both houses of Congress, there undoubtedly will be differences between the House and Senate versions of the bill. That means the appointment of a conference committee consisting of members of both houses who will have to iron out the differences before both houses vote to pass the conference committee’s final version of the bill.
Meanwhile, taxpayers wait on the sidelines trying to discern how the tax changes will affect them. Some changes will likely be retroactive, while others will be effective upon the president signing the bill. This is an incredibly difficult year to engage in year-end tax planning.
Expect to be surprised as the BBB evolves though the houses of Congress.
Jim de Bree is a Valencia resident.