House Inching Toward Vote on Reconciliation Bill

Earlier today, the House began floor deliberations on the second half of President Biden’s economic agenda – the Build Back Better Act (H.R. 5376). The timing of final votes, however, will largely be dependent on the Congressional Budget Office’s (CBO) ability to release additional financial information on the proposed $1.75 trillion package. House moderates delayed a vote on the legislation earlier this month, saying they wanted a full picture of the bill’s impact on the economy. For its part, CBO is expected to publish a full estimate of the BBBA by this afternoon.

The nonpartisan Joint Committee on Taxation (JCT) has prepared its own analysis of the legislation, which anticipates that H.R. 5376 would raise roughly $1.48 trillion in revenue over the next ten years by increasing taxes on corporations and high-income individuals. While that would not be sufficient to completely offset the cost of the package, the JCT estimate does not take into account other potential savings, such as those related to drug pricing or increased IRS enforcement. In addition, a preliminary cost assessment from the White House estimates that the bill would reduce the deficit by approximately $36 billion over the next ten years. According to the Biden administration’s analysis, the drug pricing provisions would reduce federal spending by $250 billion and increased IRS enforcement would provide an additional $480 billion in revenue.

Should the House succeed in advancing the BBBA, the legislation could still undergo potentially major changes in the Senate to appease moderate Senators Joe Manchin (D-WV) and Kyrsten Sinema (D-AZ). At this point, it’s still unclear where they stand on the proposed House package. If the Senate does make changes to the legislation, it would have to go back before the House for a final vote.

To follow is a summary of several key provisions of H.R. 5376.

State and Local Tax Deduction: The measure would increase the cap on the state and local tax (SALT) deduction to $80,000 – up from $10,000 – through 2030. Thereafter, the cap would return to $10,000 in 2031 and then expire. The current cap, which was established under the 2017 tax law (P.L. 115-97), is scheduled to end in 2025. For his part, Senator Bernie Sanders (I-VT) is pushing his own compromise provision that would restrict SALT deductions to only those who earn up to a certain level – roughly $400,000 to $550,000.

Child Tax Credit: The measure would extend the American Rescue Plan Act’s (ARPA; P.L. 117-2) expanded child tax credit for one year and limit advance payments to taxpayers with income below $150,000 for joint filers and $75,000 for single filers. It also would make the credit fully refundable.

Earned Income Tax Credit: H.R. 5376 would extend an expanded version of the earned income tax credit for childless workers for one year.

Electric Vehicles: The measure would establish new incentives for electric vehicles, including:

• A refundable tax credit for new electric vehicles through 2031 that would phase-out beginning at $500,000 for joint filers and $250,000 for single filers. The base credit amount would equal $4,000, plus an additional $3,500 for vehicles with a higher battery capacity. The credit would be increased by $4,500 for domestically assembled, union-made electric vehicles. Beginning in 2027, the credit would apply only to vehicles with final assembly occurring in the U.S.
• A refundable credit for purchasing a used electric motor vehicle through 2031. It would phase out at $150,000 for joint filers and $75,000 for single filers.
• A 30 percent credit for the cost of commercial electric vehicles through 2031, or 15 percent for hybrid vehicles.
• A 30 percent refundable credit for electric bikes through 2026 that would also phase out at certain income levels.

Prescription Drugs: The measure would direct the Department of Health and Human Services to establish a “Drug Price Negotiation Program” to negotiate a maximum price of high-cost prescription drugs for Medicare Parts D and B beginning 2025. Pursuant to the legislation, HHS would be required to identify 100 drugs without competition that have been on the market for seven years and biologics that have been on the market for 11 years, and that have the highest spending under Medicare. HHS would select as many as 10 drugs from that list for negotiation in 2025 and as many as 20 drugs by 2028, plus insulin.

Medicare Hearing Benefits: The measure would expand Medicare coverage to provide hearing benefits beginning in 2023. The benefit would include hearing assessment services and hearing aids.

ACA Premium Tax Credits: The measure would extend through 2025 the temporary expansion of Affordable Care Act (ACA) health insurance premium tax credits that were provided under ARPA.

Medicaid: The legislation would make inmates eligible for Medicaid coverage 30 days before their release. The measure would also increase the federal match (FMAP) by 6 percentage points for states that expand home and community-based services and would provide an 80 percent FMAP for administrative costs.

Children’s Health Insurance Program: The measure would permanently authorize the Children’s Health Insurance Program (CHIP). It would also require states to extend continuous CHIP and Medicaid coverage to all pregnant and postpartum individuals for one year after birth and to all children for one year after enrollment.

Health Funding: The measure would provide:

• $7 billion for public health infrastructure and $2 billion for community health center grants.
• $2.5 billion for community violence and trauma prevention grants or contracts.
• $1.3 billion for public health preparedness research and development for public health emergencies.

Paid Leave: The legislation would establish a new federal program to provide as many as four weeks of paid family and medical leave for the birth or adoption of a child, to care for a family member with a serious health condition, or for an employee’s own serious health condition. The benefit, which would start in 2024, would be tied to an individual’s average weekly earnings and hours. States with preexisting paid leave programs would receive federal funding to cover the equivalent costs of the benefits, and employers would receive grants to cover 90 percent of their paid leave benefits.

Workforce Support: The measure would provide funding for several workforce development initiatives, including:

• $2 billion for dislocated worker grants under the Workforce Innovation and Opportunity Act (WIOA).
• $1.5 billion for WIOA state grants for youth workforce investment activities and $1 billion for adult worker employment and training activities.
• $1 billion for grants to support the direct care workforce through competitive wages, child care, and training.

Child Care: The measure would establish a new child care entitlement program, which would expire after fiscal 2027. It would cap child care costs at a maximum of 7 percent of family income. Those earning less than 75 percent of the state median would pay nothing and qualify immediately, while those families up to 250 percent of state median income would qualify in the fourth year of the program. States would have to ensure child care staff receive a living wage, at a minimum, and equivalent wages to elementary educators with similar qualifications.

Universal Pre-school: H.R. 5376 would provide free pre-school to all three- and four-year-old children. States would have to ensure that pre-school programs provide a living wage and salaries equivalent to elementary school staff. Localities would also receive grants and expanded Head Start awards in states that do not participate.

Child Nutrition: The legislation would provide funding for child nutrition programs, including:

• Expanding eligibility for free school meals, allowing entire states to participate, and increasing the reimbursement rate schools are paid for the meals.
• Providing additional funding for the Summer Electronic Benefits Transfer (EBT) for Children program. The program would provide children eligible for free or reduced-price school meals with $65 per month in food benefits when school is out of session for the summer.

Housing & Community Development: The measure would provide:

• $65 billion for formula and needs-based public housing programs.
• $25 billion for the HOME Investment Partnerships Program to construct and rehabilitate affordable homes for low-income families, and $750 million for a new Housing Investment Fund to leverage private-sector investments to create and preserve affordable homes.
• $24 billion for Housing Choice Vouchers and support services, including for individuals at risk of homelessness and for survivors of domestic violence and sexual assault.
• $10 billion for down payment assistance to first-generation homebuyers, and $5 billion for the Home Loan Program to subsidize 20-year mortgages for first-generation homebuyers.
• $3.05 billion for the Community Development Block Grant (CDBG) program.
• $3 billion for a new Community Restoration and Revitalization Fund offering competitive grants to local partnerships led by nonprofits for accessible housing and neighborhood revitalization initiatives.
• $2 billion for rural rental housing to support new construction, the removal of safety hazards, and energy efficiency improvements.
• $2 billion for a new grant program to make energy efficiency upgrades to affordable housing.

Flood Insurance: The measure would wipe out $20.5 billion in debt owed by the Federal Emergency Management Agency for money it borrowed to pay claims through the National Flood Insurance Program. It also would provide $600 million for flood mapping and $600 million for FEMA to offer flood insurance discounts to certain policyholders.

Climate-Focused Programs: Funding for clean energy and environmental initiatives would include:

• $29 billion to support non-federal financing to deploy zero-emission technologies, including solar rooftop systems and zero-emission vehicles.
• $9 billion to replace lead water service lines in disadvantaged communities and install lead filtration equipment in schools and child care centers that serve those areas.
• $6.25 billion for rebates for high-efficiency electric home appliances like HVAC systems, stoves, ovens, and clothes dryers.
• $5.89 billion for a new Home Owner Managing Energy Savings (HOMES) rebate program to support home energy efficiency retrofits.
• $5 billion for grants supporting the creation and implementation of state greenhouse gas air pollution reduction plans.
• $5 billion for grants and rebates to replace school buses, garbage trucks, and other heavy-duty vehicles with zero-emission vehicles and to train workers to operate them.
• $3.5 billion for grants supporting domestic production of plug-in and hydrogen fuel cell electric and hybrid vehicles.
• $3 billion for block grants and technical assistance for community-led pollution and emissions reduction activities, mitigating urban heat islands and wildfire effects, and reducing indoor air pollution.
• $2 billion for grants and loans for new and upgraded electric transmission lines to integrate clean energy and improve the grid’s resilience. An additional $800 million would be provided for grants to facilitate siting of transmission lines across state lines.
• $1 billion for grants to states supporting electric vehicle infrastructure deployment.

Immigration: The legislation would direct the Department of Homeland Security to grant applications for “parole” to undocumented immigrants who arrived in the U.S. prior to January 1, 2011. Individuals paroled under the bill would receive employment and travel authorization and would be eligible for driver’s licenses or other state-issued identification cards. The legislation also includes provisions that would recapture unused visas, expedite status adjustment applications for legal immigrants, and help address visa processing backlogs.

GOP Lawmakers Introduces Cannabis Legalization Legislation

On November 15, a group of Republican lawmakers – led by Congresswoman Nancy Mace (R-SC) – introduced comprehensive cannabis reform legislation (H.R. 5977). The measure, entitled the States Reform Act, would remove cannabis from the Controlled Substances Act and regulate it in a similar manner to alcohol. H.R. 5977 would defer to states regarding cannabis prohibition and commercial regulation. In other words, no state or local government would be required to change its current cannabis policies.

The legislation also incorporates some of the social equity provisions that have been included in previous Democrat-led bills, including the Marijuana Opportunity Reinvestment and Expungement (MORE) Act (H.R. 3617). For example, the States Reform Act would expunge the record of those convicted of non-violent cannabis offenses. Those affiliated with cartels or who have been convicted of driving under the influence would be precluded from such relief.

In addition, the measure would impose a three percent federal excise tax on cannabis products, the revenue of which would support local law enforcement grant programs, small businesses, and mental health initiatives for veterans.

Multiple federal agencies would be involved in the regulation of cannabis. For example, the Treasury Department’s Alcohol and Tobacco Tax and Trade Bureau – which would be renamed the Alcohol, Tobacco, and Cannabis Tax and Trade Bureau – would be the chief regulator with respect to interstate commerce and international trade. The Bureau would be responsible for creating a track and trace system for cannabis, and federal officials would be authorized to issue packaging and labeling requirements for products.

The Food and Drug Administration (FDA) would be limited in its regulatory authority over the recreational market, but the agency would oversee medical cannabis products. Among other things, the FDA would be permitted to prescribe serving sizes, certify designated state medical cannabis products, and approve or regulate pharmaceuticals derived from cannabis. Notably, the agency would not have the authority to ban the use of cannabis or its derivatives in non-drug applications (i.e. dietary supplements, foods, beverages, cosmetics, etc.).

In addition, cannabis enforcement authority would be transferred from the Drug Enforcement Administration (DEA) to a newly renamed Bureau of Alcohol, Tobacco, Cannabis, Firearms and Explosives. Finally, raw cannabis would be considered an agricultural commodity and would fall under the purview of the U.S. Department of Agriculture (USDA).

Additional information on the bill, including a one-pager prepared by the Office of Congresswoman Mace and a section-by-section summary, can be accessed here.