Tax Increases Pass House, Senate Fate Uncertain
Ahead of Thanksgiving, the House passed President Biden’s “Build Back Better Act,” a $1.75 trillion bill (H.R. 5376), which included several tax increases. No Republicans voted for the 2,100-plus page bill. Now before the Senate, no Republicans are expected to vote for the legislation, and with even division, any Senate Democrat can force changes to the bill. The loss of a single Senate Democratic vote would be enough to kill the entire bill. Concerns over tax increases in the bill would strip cash flow from dealerships, potentially costing jobs. The tax increases that passed the House include:
- Expanding the 3.8 percent net investment income tax to cover business income of single filers earning more than $400,000 and joint filers making more than $500,000;
- A 5 percent surtax on modified adjusted gross income that exceeds $10 million. An additional 3 percent tax would apply to income that exceeds $25 million (also, certain trusts and estates would be subject to the taxes);
- Permanently disallowing excess business losses of non-corporate taxpayers
The bill differs from the president’s and congressional Democrats’ original proposal as it does not include the following tax increases:
- A change to the Section 199A deduction that protects 20 percent of retained earnings from taxation for pass-throughs;
- Changes to stepped-up basis; or
- Changes in exemption or the rate for the estate tax
Although the language in the House bill departed from severe job-killing tax increases on family-owned businesses, the Senate is not bound by the House bill. This means some of the tax increases nixed by the House can be put back into the bill by the Senate to offset the new social and climate change spending in the bill.
The President signed a $1.2-trillion infrastructure bill into law November 15. This bipartisan legislation does not increase income taxes or expand social programs, which are part of the separate $1.75 trillion “Build Back Better Act.”
The bill also retroactively ends the employee retention tax credit on October 1, 2021, rather than on December 31, 2021, thus limiting its availability to the first three quarters of 2021.
Biden Vaccine Mandate in Limbo, Employers Should Prepare to Comply
On November 16, the Judicial Panel on Multidistrict Litigation selected, by lottery, the federal 6th Circuit Court of Appeals to review the large number of petitions challenging the Occupational Safety and Health Administration’s (OSHA) COVID-19 Emergency Temporary “Vax-or-Test” Standard (ETS). Until the 6th Circuit takes further action on the matter, the stay issued by the 5th Circuit Court of Appeals on November 12 will remain in place and OSHA will take no steps to administer or enforce its COVID-19 ETS. Until a final order is issued in this matter, FWEDA recommends dealers review and prepare to comply with the requirements set out in the ETS.
Redistricting Shapes Up to Benefit GOP
The Republican sweep in statewide elections in Virginia, as well as the closer-than-expected governor’s race in New Jersey, have increased the odds that at least one chamber of Congress will change control in next year’s mid-term elections.
With a 50-50 Senate, both parties are seeking to gain ground to achieve a majority, and the battleground of competitive seats is becoming clearer. Democrats are defending competitive seats in Arizona, Georgia, New Hampshire and Nevada, while Republicans are defending seats in North Carolina, Pennsylvania and Wisconsin. Barring a surprise retirement or strong challenger, most of the attention in the fight for control of the Senate will be in these seven states. In the House, Republicans need to net only five seats to flip control. Nineteen states have completed their redistricting process, which redraws new congressional districts every 10 years, giving the Republicans a slight advantage. To see the latest news and maps in each state, click here. Since 1946, the party that controls the White House has lost on average 33 seats in the House and three seats in the Senate during the president’s first mid-term election. Across FWEDA territory to date, Arizona, California and Hawaii have not finalized redistricting proposals.
