Build Back Better (BBB) House Version – DOA in Senate

By Brett Scott, Vice President, Government Affairs

Overview: The House recently voted and passed their version of Build Back Better (BBB) Plan, this version is dead on arrival in the Senate and most likely will not be voted on till the end of December, before the holidays. More details of the breakdown in the bill can be found below:

Electric Vehicles: The $1.9T (new number) BBB bill includes $2B for an electric vehicle supply equipment rebate program, $1B for electric vehicle charging stations, $500M for state energy transportation plans to promote the electrification of the transportation supply, $10B for transportation electrification grants, and tax credits for plug-in electric vehicles and for the purchase of used plug-in electric vehicles and for qualified commercial vehicles. These are the same programs and funding amounts that were in the original BBB bill. Like the BIF, the bill does not include provisions on motor vehicle safety, EV purchasing, cash for clunkers and semiconductor chips.

Federal tax credits for EV’s, as follows:

• Federal tax credit for EVs jumps from $7,500 to $12,500
  • Keep the $7,500 incentive for new electric cars for five years
  • Add an additional $4,500 for EVs assembled in the US using union labor
  • Another $500 for EVs using battery packs with 50% of components (including cells) made in the US
• Zero-emission vans, SUVs, and trucks with MSRPs up to $80,000 qualify
• Electric sedans priced up to $55,000 MSRP qualify
• The full EV tax credit will be available to individuals reporting adjusted gross incomes of $250,000 or less, $500,000 for joint filers (decreased from $400,000 for individuals/$800,000 for joint filers currently in place)
• Eliminates tax credit cap after automakers hit 200,000 EVs sold, making GM and Tesla once again eligible

OTHER ITEMS

Universal pre-K: The bill would provide free pre-K for 3- and 4-year-olds. It would expand access to 6 million children a year. Funding would last six years. The provision, along with the child care measure, would cost an estimated $381.5 billion, according to the CBO.

Child care: The legislation would limit child care costs for families with children younger than age 6 to no more than 7% of income for those earning up to 250% of state median income, expanding access to about 20 million children. Funding would last six years. The provision, along with the universal pre-K measure, would cost an estimated $381.5 billion, according to the CBO.

Paid family and sick leave:  The bill includes four weeks of paid family and sick leave, costing an estimated $194 billion — but the provision is likely to be cut out of the legislation once it is taken up by the Senate. Manchin is opposed. Four weeks of paid family and sick leave would cost $205.5 billion, according to the CBO.

Enhanced child tax credit: The child tax credit which provides $300 a month for each child under age 6 and $250 a month for each one ages 6 through 17 — would be extended through 2022 for more than 35 million families. Heads of household earning up to $112,500 and joint filers making up to $150,000 annually would qualify for the enhanced payments. But, unlike in 2021, only these families would receive the funds in monthly installments next year. Eligible parents with higher incomes would have to claim the credit on their tax return the following year. The credit would be made permanently refundable so the lowest income families would continue to qualify. The enhancement, which was part of the $1.9 trillion coronavirus relief package Democrats enacted earlier this year, is currently only in place for 2021.This credit, along with the earned income tax credit, would cost about $203 billion, according to the CBO.

Earned income tax credit: The expanded earned income tax credit would be extended through 2022, helping 17 million low-wage childless workers. The boost, also part of the relief package, is only in place for this year. It nearly triples the maximum credit childless workers can receive, extends eligibility to more people, reduces the minimum age and eliminates the upper age limit. This credit, along with the enhanced child tax credit, would cost about $203 billion, according to the CBO.

Home health care: The proposal calls for permanently improving Medicaid coverage for home care services for seniors and people with disabilities, with the goal of reducing the more than 800,000 people on state Medicaid waiting lists. It also aims to improve the quality of caregiving jobs. The measure would cost nearly $158 billion, according to the CBO.

Affordable Care Act subsidies: The federal premium subsidies would be extended through 2025 under the bill. It would reduce the cost of coverage on the Obamacare exchanges, particularly for moderate-income and middle-class Americans. The boost, also part of the Democrats’ relief package, is currently set to expire after 2022.This provision, along with Medicaid expansion, would cost $126 billion, according to the White House’s latest estimate. And the number of uninsured Americans would drop by 3.4 million, mainly due to the subsidies extension and the Medicaid provision, according to the CBO. The legislation also would extend for one year a provision of the American Rescue Plan that allows those receiving unemployment benefits to qualify for federal subsidies that reduce their monthly premiums to as little as $0. This provision would cost $74 billion, according to the CBO.

Medicaid coverage gap: The Democrats are calling for providing Affordable Care Act premium subsidies for low-income Americans in the 12 states that have not expanded Medicaid, enabling them to buy Obamacare policies with no monthly premiums, through 2025. Doing so would cost about $57 billion, the CBO estimates. The bill would also increase the federal assistance for expansion states to 93% through 2025. And it would require state Medicaid programs to provide 12 months of eligibility to women after they give birth. States now typically provide 60 days of coverage.

Medicare hearing benefits: Hearing services would be covered under Medicare, starting in 2023, but vision and dental benefits would not be included. This measure would cost $36.7 billion, according to the CBO.

Climate change: The bill would deliver nearly $570 billion in tax credits and investments aimed at combating climate change. It would offer tax credits to families that install solar rooftops or buy electric vehicles, for example. The investments are aimed at providing incentives to grow domestic supply chains in solar and wind industries. The legislation also calls for creating 300,000 jobs by establishing a Civilian Climate Corps that works to conserve public lands and bolster community resiliency.

Affordable housing: The legislation would funnel $25 billion into the construction, rehabilitation or purchase of affordable homes for low-income people and for the creation and preservation of affordable rental housing. It would provide $65 billion to address the capital needs backlog of public housing and would bolster rental assistance to hundreds of thousands of families. The measure would also invest in down payment assistance and in community-led redevelopment projects in under-resourced neighborhoods. And it would provide $24 billion to fund housing vouchers and supportive services. The effort would cost about $148.1 billion, according to the CBO.

Pell grants: The measure would increase the maximum Pell grant by $550 for more than 5 million students enrolled in public and private nonprofit colleges and expand access to undocumented students brought to the US as children, who are known as Dreamers. It would invest in historically Black colleges and universities and other institutions that serve underrepresented communities. And it would increase funding for workforce development. These provisions would cost a total of $39.8 billion, according to the CBO’s estimate.

Children’s nutrition: The bill would expand free school meals to nearly 9 million children during the school year and provide the parents of 29 million kids a $65 per child per month benefit to purchase food during the summer.

Immigration: The President has called for a $100 billion investment to reform the nation’s immigration system, as well as reduce backlogs, expand legal representation and make changes to the asylum system and border processing. But the Senate parliamentarian, who has the final say on whether the legislation adheres to procedural rules, has ruled twice against the Democrats for including an immigration provision in the economic bill.

State and local tax deduction: Under the House bill, deductions would be capped at $80,000 per year over a nine-year time span.

HOW IT GETS PAID FOR

Corporate taxes: The bill would put in place a 15% minimum tax on the corporate profits that large companies report to shareholders, not to the Internal Revenue Service. This would apply to companies with more than $1 billion in profits. The legislation also includes a 1% surcharge on corporate stock buybacks. Also, it would impose a 15% minimum tax, calculated on a country-by-country basis, that American companies pay on foreign profits, consistent with an agreement Biden recently won among 136 countries. The provisions would yield an estimated $814 billion, the Joint Committee on Taxation said.

Taxes on the rich: The wealthiest Americans would pay a 5% surcharge on income above $10 million, and an additional 3% levy on income above $25 million. The bill would also close the loopholes that allow some affluent taxpayers to avoid paying the 3.8% net investment income tax on their earnings. And it would continue the limitation on excess business losses. This measure would raise $640 billion, the committee estimates.

IRS enforcement: The bill would beef up IRS enforcement so that it can ensure that people are paying what they owe to Uncle Sam. The new enforcement measure would focus on Americans with the highest incomes, not those earning less than $400,000 a year. The CBO estimates that the provision would raise revenue by $207 billion.

Medicare drug negotiation: The bill would empower Medicare to negotiate prices of certain costly medications administered in doctors’ offices or purchased at the pharmacy. The Health and Human Services Secretary would negotiate up to 10 drugs in 2025. The number would rise to up to 20 medications starting in 2028.  The legislation would also impose penalties if drug companies increase their prices faster than inflation. And it would redesign Medicare’s Part D drug plans so that seniors and people with disabilities wouldn’t pay more than $2,000 for medications bought at the pharmacy. The bill would also cap what Americans pay for insulin at $35 a month.

Drug rebate rule: The bill calls for blocking a Trump regulation that would change the drug industry’s rebate system, though it isn’t set to go into effect until 2026. The rule effectively would ban drug makers from providing rebates to pharmacy benefit managers and insurers. Instead, drug companies would be encouraged to pass the discounts directly to patients at the pharmacy counter. Altogether, the prescription drug measures would save around $297 billion, including about $79 billion from allowing Medicare to negotiate drug prices, according to the CBO.