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November 22, 2021

MAKE YOUR VOICE HEARD: U.S. House Approves Build Back Better Budget, Tax Bill, But Senate Still Needs To Act

On a party-line, 220 to 213 vote on November 19, the U.S. House of Representatives approved President Joe Biden’s Build Back Better budget and tax reconciliation.

While this step was an important milestone for the White House, the action is by no means the end of the debate on this legislation. Americans still have an opportunity to let their representatives in Washington, D.C. know how they feel about the provisions in the reconciliation. That is because the U.S. Senate must approve the bill before it can be signed by the president.

Senate Majority Leader Charles Schumer (D-N.Y.) has said the chamber will consider the legislation in December, but it is clear, at this point at least, that he does not have the 50 votes needed to pass it. Moderate Sens. Joe Manchin (D-W.Va.) and Kyrsten Sinema (D-Ariz.) both have said they will need to see changes to the bill before they can vote for it.

As a reminder, the bill includes $1.75 trillion in new spending over the next 10 years for climate change, health care, childcare, education, and other “human infrastructure” priorities. It finances these investments by raising approximately $1.5 trillion in new taxes. Specifically, as the National Association of Manufacturers has explained, the bill would raise taxes on corporations, businesses with international operations, and pass-throughs.

For corporations, the outline calls for:

  • Creating a “book tax,” or new 15 percent corporate alternative minimum tax in the form of a tax on financial statement income;
  • Placing new limitations on companies’ ability to deduct interest on business loans;
  • Imposing a new excise tax on stock buybacks; and
  • Implementing a higher global minimum tax that would be more complex and that would subject more foreign income to the tax.

For pass-through entities, the outline calls for several new surtaxes, including:

  • A 3.8 percent net investment income tax applied to business income greater than $400,000 (single) or $500,000 (married);
  • A five percent surtax on individuals with adjusted gross incomes (AGIs) totaling more than $10 million; and
  • An additional three percent surtax on AGIs totaling more than $25 million.

As Connecting the Dots has reported, the legislation also includes several problematic employment and labor provisions, including:

  • Penalties for violations under the National Labor Relations Act;
  • Personal liability for company officers and directors for labor violations; and
  • Mandatory neutrality agreements for direct care grants.

The Coalition for a Democratic Workplace, which MSCI is a member of, has said these penalties would primarily impact small, local businesses.

MSCI opposes the tax increases and labor provisions outlined in this legislation, and asks that its member company leaders and employers use this link from the National Association of Manufacturers or this link from the U.S. Chamber of Commerce to send a letter to their lawmakers asking that they oppose this legislation.

To make sure voices from the industrial metals community are heard on Capitol Hill, MSCI signed a letter with the U.S. Chamber of Commerce and more than 300 organizations that asked lawmakers to vote against the legislation. The letter argued the bill would “harm the recovery and hamstring America as we work to compete globally, especially with China.” Click here  to read the letter.

As the U.S. Chamber of Commerce has argued, the reconciliation bill could increase inflationary pressures because of its deficit-financed spending. The nonpartisan, nonprofit Tax Foundation also has discussed the bill’s potential impact on inflation. Read that information here.

MSCI also has agreed to sign a letter with the National Association of Manufacturers that will express opposition to the “book tax” contained in the budget reconciliation. This provision would tax on the financial statement income of certain businesses. That letter will be sent soon — stay tuned to Connecting the Dots for more information. Competitive and pro-growth tax policy allow industrial metals companies to flourish in their communities, grow their facilities, raise wages for employees, and invest. A proposed tax on book income would significantly hinder manufacturers’ ability to invest in capital. MSCI urges its member company leaders and employees to use this link from the National Association of Manufacturers to learn more about the book tax and to write to lawmakers to oppose it.

Meanwhile, a new poll by the Winston Group found Americans want federal policymakers to focus on addressing inflation instead of raising taxes. As the S-Corp Association explained, when asked what is the more important priority for the country, 68 percent of Americans said that dealing with inflation and scarcity of goods caused by supply chain problems was more important than passing the Build Back Better plan. Only 21 percent thought the Build Back Better plan should take priority.

The S-Corp Association has more information here about how the taxes in the bill would impact U.S. small businesses and workers. Click here to read that report.

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