Nov. 4 Update: What’s in the Third Version of Biden’s Big Government Spending Bill?
Congressional Democrats have released a third version of their big government socialist Build Back Better Act. Compared to the previous draft, the newest version adds another 450 pages, resulting in a 2,135-page plan for a reckless tax and spending spree. We asked analysts from The Heritage Foundation to examine what is in the updated bill text. Here are their responses:
Version 3 Updates
- A federal takeover of family leave policies, which would provide the highest benefits to those with the highest incomes.
- Imposing government price controls that would allow for less access and fewer choices to life-saving treatments.
- A massive increase in the state and local tax deduction, from $10,000 to $72,500, which would simply be a subsidy for high income earners in high tax states.
- A new tax subsidy for union politics.
- A tax subsidy for the news media.
- A significant tax increase on nicotine products, which will burden low and middle income Americans.
This third version of the bill includes significant changes to federal policy, including creating expensive new entitlement programs. But make no mistake, more changes will be coming.
– Matthew Dickerson is the director of The Heritage Foundation’s Grover M. Hermann Center for the Federal Budget
The Senate “plan C” for immigration is another form of amnesty in the guise of “parole” for millions of illegal aliens. This would be a gross abuse of humanitarian parole, which Congress enacted in the Immigration and Nationality Act as a temporary benefit given in discretion on a case-by-case basis for an urgent humanitarian purpose.
The classic example of who would benefit from humanitarian parole is someone who needs emergency surgery, and there is no time to obtain a visa ahead of time. When the temporary parole condition ends, the benefit ends and the alien returns to their prior status. If the recipient had no lawful documentation to be in the U.S., then he would have to depart the U.S. at this time.
The mass parole Senate Democrats seek is neither temporary, nor on a case-by-case basis, nor for an urgent humanitarian purpose. The plan would also provide work authorization and, likely, advance parole, which would allow beneficiaries to travel outside the U.S. and reenter the U.S.
Whereas parole does not provide an alien a green card (the “path to citizenship”), advance parole does, creating an egregious loophole.
– Lora Ries is the director of The Heritage Foundation’s Center for Technology Policy and a senior research fellow focused on homeland security at Heritage’s Davis Institute for National Security and Foreign Policy
Paid Family Leave
The reinstated federal paid family leave entitlement knocks the amount of leave down from 12 weeks per year to four weeks and shifts administration of the program from the Treasury Department—which said it couldn’t run the program—to the Social Security Administration.
Just like Social Security, the paid family leave program would be another unfunded entitlement. With only four weeks of leave, it’s only a matter of time before policymakers attempt to further expand the program. Social Security started out as a 2% payroll tax and now consumes 12.4% of workers’ paychecks. As Sen. Joe Manchin, D-W.V., has pointed out, America doesn’t need another unfunded entitlement program to add to our already unsustainable federal budget.
Workers who need quick approval and payment—namely, lower-income workers who can’t pay their bills without benefits—should rightly be concerned that it takes about six weeks for the Social Security Administration to process even simple retirement benefits applications when all they have to do is determine the workers’ age and earnings history based on information the Social Security Administration already has on file.
Adding in medical qualifications and relationship status could add weeks if not months to the process. The average disability insurance applicant waits 3 to 5 months for an initial decision, and many applicants who have to appeal decisions before receiving benefits wait over two years.
Most people would rather work directly with their employer than have to navigate a burdensome government program when they need to take a couple days, or even a couple months off from work. And considering the 64% increase in workers with access to paid family leave over the past five years, workers’ chances of having more flexible and accommodating paid family leave through their employers are rising.
A federal program will halt this growth in its tracks, and also result in less flexible and accommodating programs for workers who already have access to employer-provided leave because it dangles federal tax dollars at employers who shift their programs to third-party providers.
There are better ways to encourage more generous and accessible paid family leave than a federal takeover.
– Rachel Greszler, a research fellow focusing on economics, the budget, and entitlements at The Heritage Foundation
House Democrats have released a drug pricing proposal that expands government’s role by setting prices for prescription drugs for the first time. Specifically, the government would set prices in Medicare for a limited number of drugs that account for substantial spending in Medicare.
Previous proposals would have applied those prices to these drugs in all markets not just Medicare. It’s a policy that would hurt access to drugs and innovation, undermine the ability of private plans to negotiate further price discounts for enrollees, and discourage future generic drugs, which often cost less, from coming to market.
It would overturn a decades-long bipartisan consensus that the government should create a climate for innovation and lower costs in prescription drugs—without setting prices. It also would establish a statutory framework and administrative structure that could easily be expanded in the future.
The proposal does contain some policy that The Heritage Foundation advocates for because it would address government policies that drive up costs. But on net, this bill is a bad deal and should not become law. For more on what Congress should be doing instead, see Doug Badger’s “How Congress Can Make Real Progress on Prescription Drugs.“
– Ed Haislmaier is the Preston A. Wells, Jr. senior research fellow focusing on health care policy at The Heritage Foundation
State and Local Tax Deductions
The most recent version of the House’s reconciliation package includes a provision that would provide almost $62,000 each for the top 0.35% of tax filers in the U.S. and $45 for the bottom 81%.
That’s hardly in line with the social infrastructure package’s purported theme of taxing the rich to help struggling families.
Yet, it’s become increasingly clear that liberal politicians are willing to trade their stated values for political support—even if it’s contrary their alleged goals.
Under the House’s proposal to allow taxpayers to deduct up to $72,500 of state and local taxes from their income for federal tax purposes, the Joint Committee on Taxation estimated that federal revenues would fall by $222 billion over the next 5 years.
(Note that the Joint Committee on Taxation scores the provision as a net revenue-raiser of $2 billion over 10 years, but that is because the current $10,000 cap on the SALT deduction is set to expire in 2025, and Democrats’ proposal effectively adds a new $72,500 cap from 2026-2031, appearing to “raise” money.)
According to the Tax Foundation, 80% of that windfall would go to taxpayers making over $200,000 per year.
Based on the most recent 2018 IRS tax statistics, that translates into $92 billion ($13,340 each) for taxpayers making between $200,000 and $500,000; $52 billion ($47,060 each) for taxpayers making between $500,001 and $1,000,000; and $33 billion ($61,750 each) for taxpayers making over $1,000,000.
Only 2.5% of the state and local tax provision would flow to the 81% of households that make less than $100,000. On average, those households would receive $45 over the next five years, but the overwhelming majority would receive nothing.
Although not quantifiable, the real winners from allowing up to $72,500 of state and local taxes to be deducted are the politicians in liberal states that would even impose such high taxes to begin with.
What the state and local tax deduction actually does is to allow liberal state and local lawmakers who prefer bigger governments to raise taxes and shift up to a third of the cost onto federal taxpayers in other states.
It’s not surprising to see which lawmakers are lobbying hardest for this provision when you consider the average state and local income taxes imposed on millionaires across the states are two to three times as high in New York, New Jersey, and California as in Arizona, North Carolina, and West Virginia.
Average state and local income tax deductions for individuals with over $1,000,000 of income (rounded to the nearest hundred):
- New York: $395,000
- California: $376,000
- New Jersey: $236,000
- Arizona: $113,000
- North Carolina: $124,000
- West Virginia: $126,000
If politicians want to provide state and local tax relief, they should eliminate the state and local tax deduction entirely so that state and local lawmakers will only tax their residents enough to cover the cost of things for which they’re willing to pay the full price.
– Rachel Greszler
Welfare for Journalists
The first version of the spending package contained a tax perk for “local news journalism” designed to prop up local newspapers and broadcasters. These tax credits are refundable, meaning that if a news outlet is unprofitable due to a lack of local interest, taxpayers will cut them a check.
While this handout was removed in the second version of the bill, the latest version brings it back and even expands it. Now, not only can a media organization get a larger amount of tax credits, but eligibility was expanded to include companies of up to 1,500 employees.
As corporate welfare, this is bad enough to begin with. Worse, because the handout from taxpayers is being delivered through partisan legislation, it will encourage even more partisanship in the media.
– David Ditch is a policy analyst at Heritage’s Grover M. Hermann Center for the Federal Budget
Democrats are proposing the largest increase in means-tested welfare in U.S. history by far. The latest Democrat tax and spend reconciliation bill (also known as the “Build Back Better” bill), would increase means-tested welfare spending by $756 billion over the next five years.
In addition, the Biden administration has used administrative action to increase permanently food stamp benefits by 21%, for a cost of an additional $180 billion over five years. Added together, the total cost of the additions to these means-tested welfare programs over five years is $836 billion. The Democrat bill artificially hides the actual cost of the new programs by terminating or severely reducing them after the fifth year.
If all the programs in the bill were fully funded through the full 10-year budget window, the total cost would be $2.3 trillion. Adding the Biden administration’s food stamp increase brings it to $2.5 trillion.
The increases in spending are unprecedented. For example, the bill proposes new spending of some $26 billion per year for low-income housing. This is roughly 50% above the current baseline spending level of $53 billion per year.
All these spending and policy changes should be considered in light of the fact that taxpayers already spend $1.16 trillion a year on means-tested assistance. Each poor family in the United States receives on average—today—roughly $65,000 per year in cash, food, housing, medical care and free education for their children.
In addition, the bill reverses President Bill Clinton’s welfare reform by removing work requirements from large cash-welfare programs. This resurrects a failed policy of paying families not to work. Clinton was elected precisely to eliminate this type of welfare.
History teaches us the failures of such a flawed policy that keeps low-income families out of work. In the 1990s, Congress replaced a failed program, Aid to Families with Dependent Children, with Temporary Assistance for Needy Families, a work-based program. Prior to the that, low-income families faced profoundly negative results from no-strings attached cash benefits.
One in seven children was dependent on the Aid to Families with Dependent Children welfare program, and intergenerational poverty worsened. Some 90% of cash-safety-net recipients were single mothers; the majority were never married. The majority of families were on Aid to Families with Dependent Children welfare program rolls for an average of 8 years. Work among the recipient parents was extremely low—nearly nine in 10 families were workless. Many remained in long-term poverty.
Today’s welfare system—plus Democrat expansions and changes—for the most part penalizes work and discourages marriage, undermining self-support and the well-being of the poor. Rather than pouring more money into an extremely expensive and failed system, Congress should reform the system to encourage work and promote rather than penalize marriage. Such a reform would truly benefit the poor and society.
– Robert Rector is a senior research fellow focusing on domestic policy studies at The Heritage Foundation’s Institute for Family, Community, and Opportunity, and Jamie Bryan Hall is a research fellow focuses on poverty and welfare at The Heritage Foundation
The above-the-line tax break for up to $250 of workers’ union dues is back. This tax break doesn’t apply equally to all unionized workers, however—it’s only available to “full” union members that don’t opt out of paying the portion of dues that goes towards supporting unions’ political causes and campaign contributions.
Moreover, the deduction’s above-the-line status puts political union dues contributions on par with IRA contributions, student loan interest, and teachers’ out-of-pocket classroom purchases.
It’s outrageous that liberal politicians would pass a strictly party-line bill that effectively uses federal tax dollars to prop up unions’ political efforts—95% of which support liberal politicians and liberal causes.
The link between unions’ political contributions and lawmakers’ support is clear in statements from union bosses, such as the late Richard Trumpka’s threat to lawmakers ahead of a vote on a union wish list: “Those who would oppose, delay or derail this legislation, do not ask us—do not ask the labor movement—for a dollar or a door knock. We won’t be coming.”
This is just one of many union subsidies that unfairly tip the scales towards unions—an additional $4,500 tax rebate on union-made electric vehicles, a 10% bonus on the advance manufacturing production tax credit for unionized employers, and limiting federal construction spending to unionized workers are a few others.
– Rachel Greszler
The following assessments are from Oct. 28, and are based on the second draft of the spending bill:
The White House’s newly released framework returns to a tried-and-true way to obscure the true cost of the legislation: budget gimmicks. The current reconciliation instructions place caps on the 10-year deficit impact of provisions that could be included in the bill.
However, the new framework provides partial funding for many programs—creating temporary benefits that are clearly intended to be made permanent. This means that the cost estimates in this framework are only the tip of the iceberg of what the White House has planned.
For example, both the child care and pre-K provisions are reported as being given “funding for six years” despite both being listed also as “a long-term program.” The Obamacare tax credit extension would last only through 2025. The expanded Child and Earned Income tax credits would each be extended for only one year.
Keep in mind that the annual cost for each of these programs would, likely, be higher in the 10th year of the budgetary window than in the first year. As such:
- Childcare and Pre-K: Actual 10-year cost is likely more than twice the reported cost of $400 billion
- Obamacare Tax Credit: Actual 10-year cost is likely much more than three times the reported cost of $130 billion.
- Child and Earned Income Tax Credits: Actual 10-year cost is likely more than 10times the reported cost of $200 billion.
In total, these programs would likely cost well over $2.3 trillion above the estimate in this framework over 10 years. This excess would be more than $18,700 of new spending per American household.
These gimmicks will set up future congresses with intentionally tough votes whether to extend new entitlement benefits. This process is clearly intended to circumvent the fiscally responsible controls in the reconciliation process. Using these gimmicks, the bill could be used to sneak in much larger debt-busting spending.
The issue here is not simply the spending—it is where that money comes from and where it goes.
By front-loading the spending and spreading tax hikes across 10 years, the framework would increase already-high inflationary pressures. Even worse, the taxes would suppress business investment at a time when the economic recovery is in danger of stalling out.
The drafters of this framework use the term “investment” to cover their planned corporate cronyism and wealth redistribution. This bill would make no investment—it would only misdirect the wealth generated by all Americans through their hard work.
Make no mistake, this plan is ultimately a framework for how much Biden wants to take out of your wallet to fund his ideological interests.
– Richard Stern is a senior policy analyst focusing on budget policy at The Heritage Foundation and David Ditch
Child Allowance Tax Credit
In March, Democrats transformed the child tax credit into a $250 to $300 per child
monthly child allowance—no work conditions attached. Now, Democrat’s newly released framework would extend the monthly child allowance for another year, through the end of 2022.
The child tax credit used to increase as low-income parents worked more. The Biden child allowance, however, now go to non-working families because they removed the child tax credit’s existing requirement to work. Proponents insist that this giveaway won’t substantially affect low-income parents’ interest in working, but a new study has made it clear what history also teaches us: Fewer low-income families will work.
The Biden administration has claimed that this change would provide tax relief to families; in reality, this is a “bait and switch” claim. The vast majority of the spending would send unconditional welfare checks to low-income Americans.
This policy will subsidize nonworking families, increasing the likelihood that the most vulnerable will remain outside the workforce. It also will subsidize single parenthood, including among teens, thereby weakening the probability that children will be raised by a married mother and father. Overall, the policy will undermine marriage and discourage work, fewer children will experience social success and upward mobility, and low-income Americans will be left behind.
History teaches us the failures of such a flawed policy. In the 1990s, Congress replaced a failed program, Aide to Families with Dependent Children, with Temporary Assistance for Needy Families, a work-based program. Prior to the Temporary Assistance for Needy Families program, income families faced profoundly negative results from no-strings attached cash benefits.
One in seven children was dependent on the Aide to Families with Dependent Children welfare program, and intergenerational poverty worsened. Some 90% of cash-safety-net recipients were single mothers; the majority were never married. The majority of families were on Aide to Families with Dependent Children welfare program rolls for an average of eight years.Work among the recipient parents was extremely low—nearly nine in 10 families were workless. Many remained in long-term poverty.
Moreover, researchers at the University of Chicago have warned that the Democrats’ effort to rollback work-requirements in welfare would lay the stage for history to repeat itself. The researchers found that 1.5 million workers—2.6% of all working parents—would exit the labor force if the child allowance is made permanent. Accounting for the drop in work, the authors calculate that the child allowance would not ease deep child poverty (families making less than $18,945). This is a far cry from the 39% reduction in deep poverty the left promised.
Unpublished data from the Bureau of Labor Statistics suggests the payments may already be reducing work. When the pandemic began, parents experienced fewer employment losses. But since the late spring of this year—coinciding with the beginning of the child payments—that trend reversed, and parents’ employment actually declined.
Our nation’s safety net already serves tens of millions of people with over $1.1 trillion federal tax dollars allocated to 89 means-tested federal welfare programs, including nearly $500 billion spent on means-tested cash, food, housing, and medical care for poor and low-income families with children. This money has a direct impact on the well-being of poor and lower-income Americans and often provides incentives that are actively harmful to the poor, including by undermining marriage formation.
Policymakers are rightly looking for ways to support marriage, encourage work, foster upward mobility, and help more Americans to overcome poverty and attain self-sufficiency. Those who want to achieve that goal should begin by rejecting Biden’s plan to reverse the successes of a quarter-century of work-based welfare reform.
– Leslie Ford, a visiting Fellow focusing on domestic policy studies at The Heritage Foundation, and Rachel Greszler
The framework claims it will raise $325 billion from a 15% corporate minimum tax on large companies’ book income. Book income is what companies report in their financial statements. Different accounting rules apply for determining taxable income and book income, and that’s by design.
It’s troubling that the rules for determining book income are determined by a Connecticut-based nonprofit, the Financial Accounting Standards Board. Effectively, Congress could be handing some of its taxing authority over to a private organization.
Advocates of the new minimum tax justify the tax on the grounds that some corporations “get away with” not paying tax in certain years.
Corporations often pay zero taxes in a year because of losses in that year or because they accrued net operating losses in prior years. Net operating losses are an efficient, desirable feature of a corporate income tax because they help ensure that the tax code is not biased against businesses with large year-over-year fluctuations in loss and income.
Suppose Company A has $1 million of profit one year and another $1 million profit in the second year. Company B, on the other hand, suffers a loss of $10 million in the first year, followed by a gain of $12 million in the second year. Note: both companies have a total profit of $2 million over the second years. If not for the allowance of net operating losses, Company B would have to pay tax on $12 million of profit in the second year but would get no tax relief for the $10 million of losses incurred in the first year.
Introducing a minimum tax on book income complicates and distorts the net operating losses system by leaving certain taxpayers unable to use net operating losses to offset future gains. Book income does not factor in net operating losses, introducing a bias in the tax code against companies with large fluctuations in loss and income. This bias would extend to companies that have a significant one-time investment expense leading to a taxable loss. Effectively, this plan would force certain Taxpayers to pay taxes on their losses, dollar for dollar, as if they were income.
Since the 2017 Tax Cuts and Jobs Act, companies have been able to immediately expense investments in short-lived assets. By encouraging capital investment, this is one of the most pro-growth policies in the tax code. The minimum tax would counterproductively work to offset these pro-growth expensing provisions, because under current financial accounting rules, such expenses may only be deducted over the course of several years.
Under the present tax system, when companies do consistently avoid paying tax, it is usually because they are able to claim preferential tax credits that are only available to favored businesses or industries. Unfortunately, there are dozens of provisions now being considered that would expand corporate tax credits.
Minimum taxes are burdensome to administer and comply with, as they effectively represent entirely new parallel tax systems. In addition to the corporate profits minimum tax, Congress is also weighing expansion of another minimum tax system in the international tax code. These additional layers of complexity are good news for auditors and accountants, but bad news for businesses that want to focus on improving the goods and services they provide.
– Preston Brashers is a senior policy analyst focusing on tax policy at The Heritage Foundation
Democrats went back to the playbook of the 2000s and are regurgitating stale energy policies that don’t work to subsidize politically preferred energy technologies through the tax code. Included in the House Democrats’ massive spending package is a $555 billion wealth transfer from taxpayers to fund the lifestyle choices of wealthy Americans, corporations, and environmental activists.
The biggest ticket item is $320 billion in tax subsidies for electric vehicles, solar energy, wind turbines, biofuels and other boutique fuels, and other so-called green energy technologies. This is to say nothing of the $10 billion for college programs to train a generation of environmental activists, $2.5 billion for “tree equity,” and $5 million apiece for desert fish and bee conservation.
It’s bad enough that years of lobbying by special interests appears to be working. Back in 2015, Republicans and Democrats reached a compromise in the omnibus spending bill to extend credits one more time and put them on a schedule to sunset in 2022, a decision that diverted over $14 billion to the green energy industry. From the beginning, these credits were designed to be temporary but have expired, been extended, re-extended, and retroactively extended for decades.
The bill would not only renew these tax credits—it would expand them by making them available for cash rebates. Of course companies are taking the hint and already figuring out creative ways to cash in—for example, by buying electric vehicles to offer as rental cars and loaners just to get the tax write off. While that may be a shrewd business move one can’t blame companies for making, one should blame Congress for being all too willing to push policies that put taxpayers on the bill for it.
Yet somehow, the left has managed to make these green energy subsidies even worse. Tied to tax credits for electric vehicles, wind, and solar are additional bonuses for labor unions. While the framework promises to help “more Americans to join and remain in the labor force,” it intentionally rigs the game against workers who choose not to join a labor union and against foreign-owned companies investing in the U.S.
Ironically, this could harm plans for expansive new manufacturing spaces for electric vehicles and batteries—allegedly the very technologies the left wants—by companies that don’t fit the bill’s narrow agenda.
To be very clear—the problem isn’t green energy technologies. The problem is cronyist energy policy that are patently unfair, increase barriers to entry for innovative technologies that don’t fit the government’s mold, mask risks and costs, and encourage behavior our common sense might otherwise dissuade us from.
If Congress wants to support energy innovation in the U.S., it should be moving closer to—not further from—a pro-growth, competitive tax policy. This should include getting rid of alltargeted energy tax credits and championing policies like full and immediate expensing of R&D, short-term assets (like tools and equipment) and long-term assets (like manufacturing space).
We know what the results of good energy policy can look like. Between 2018 and 2019, the economy was breaking records in growth and employment as average energy costs fell 5% and Americans’ per capita energy costs decreased in every state except California. And yet the left wants the rest of America to look like California and is trying to export the state’s climate policy experiment through the tax code and the Biden administration’s regulatory agenda.
If green energy technologies are low-cost and competitive, why is Congress still throwing billions of taxpayer dollars at them every year? And what will it take to get Congress to keep the promise it made in 2015?
– Katie Tubb is a senior policy analyst focusing on energy and environment at The Heritage Foundation
The White House has been trying to use the COP26 climate conference in Glasgow next week to force a vote on its radical social and economic legislative agenda and to force unity within the Democrat party. As the Build Back Better bill’s total spending has been whittled down (which isn’t saying much considering the whopping $1.7 trillion price tag), centerpiece climate policies like the Clean Electricity Performance Plan have gone to the wayside.
That’s a relief for taxpayers and electricity customers alike, however harmful climate policies still remain in addition to hundreds of billions in spending on green energy subsidies.
One consequential climate policy still on the table is a fee on oil and natural gas. The bill would amend the Clean Air Act to create a whole new program in the Environmental Protection Agency to monitor and fine methane emissions from onshore and offshore oil and natural gas production, processing, transmission, storage, imports, and exports.
Given that oil and natural gas provide over two-thirds of Americans’ total energy use—think heat, power, transportation – it’s basically an energy tax. Policies that increase the costs of energy harm all people, and particularly the poor. Further, oil and natural gas are critical feedstocks for making thousands of products that improve Americans’ lives—pharmaceuticals and hospital equipment, food safety packaging, fertilizer, road top, even cosmetics and sports equipment.
The House bill gives the EPA $775 million to monitor methane emissions, administer and collect fines, and set regulations which the bill directs the EPA to make even more strict within two years. A grant program is perhaps meant to soften the blow, but it’s a fantasy to think that the higher costs of producing oil and gas won’t be passed down to customers—who will also be paying a second time as taxpayers to foot the bill for this new EPA program.
To make matters worse, the bill would also ban new production of oil and gas off of nearly all of America’s coastline.
The Biden administration acknowledges eliminating all greenhouse emissions from the US will have no meaningful impact on global temperatures. Yet the administration and allies in Congress continues to push punishing climate policies that will raise costs and taxes on American families and businesses.
In 2015, Sen. Chuck Schumer, D-N.Y., said: “Time and time again, Republicans pledge their allegiance to foreign special interests above the American middle class.” He was speaking of the Keystone XL pipeline, which would have brought Canadian energy, investment, and jobs for Americans. Ironically, the Biden administration and allies in Congress are all too eager to force through a penalizing bill on American families and businesses just to curry favor with countries at Glasgow.
While the Biden administration has made climate change an end all be all, there’s something missing in his agenda: support for American families and businesses.
– Katie Tubb
The proposal would make existing Affordable Care Act subsidies more generous and make them available to more people, regardless of income.
Specifically, individuals with income between 100% and 150% of the federal poverty line would no longer have to contribute to the cost of their Obamacare premiums. Obamacare subsidies would be extended to the “rich”—defined here as individuals with incomes above 400% poverty, and it would also offer new federal subsidies for those individuals in state that chose not to adopt the Obamacare Medicaid expansion in lieu of the creation of a new Medicaid-public option.
Although the subsidies are temporary since they are tethered to Obamacare (another budget gimmick), these changes are intended to drive more people to the government-run Obamacare exchanges, including some of whom would have otherwise had insurance.
The more people enrolled in Obamacare, the more the government controls the delivery of care and benefits. Moreover, these changes attempt to cover up the fact that Obamacare is driving up—not down—the costs of coverage, and that means that the mega-insurance plans in Obamacare will continue to raise premiums, knowing that ultimately the taxpayers will pick up the cost.
It changes the requirements for those with access to employer-based coverage to qualify for Obamacare subsidies.
Under current law, individuals with access to employer-based coverage are not eligible for Obamacare subsidies unless their share of the premium costs exceed 9.2%. The bill would lower that threshold to 8.5%.
The private, employer-based market is where the majority of American still get their health care and remains a critical obstacle to a full-blown government-run health care plan. Lowering the threshold is a small, but significant, shift in the opposite direction.
This change alongside expanding the availability of subsidies could disrupt the employer-based market by driving more people out of their existing coverage and toward the government-run plan. A recent Congressional Budget Office estimate notes that the package of policies embedded in the plan would result in 2.8 million fewer people with employer-based coverage.
The proposal blocks access to information about non-Obamacare coverage options. The bill would prohibit federal funds from being used to “promote non-[Affordable Care Act] compliant health insurance coverage” and explicitly defines short-duration and association health plans as such options.
This comes on the heels of the Biden administration’s move earlier this year to use taxpayer money to fund a marketing campaign to promote Obamacare.
With rising costs and fewer options, many Americans have sought out alternative health care arrangements. Promoting Obamacare over non-Obamacare alternatives is yet another attempt to shut down private competition and drive people to the government-run Obamacare exchanges, where the government determines access to the coverage options.
– Nina Owcharenko Schaefer is a senior research fellow focusing on health policy at The Heritage Foundation
Biden’s framework would spend $40 billion to increase the maximum Pell Grant award by $550, send additional subsidies to historically black colleges and universities and minority-serving institutions, and provide additional funding for community colleges and workforce development.
These additional federal subsidies will only encourage schools to raise prices, shifting more of the burden of paying for higher education from the student who benefits to all taxpayers.
Colleges will have received an additional $76 billion in federal spending over the past year and a half in response to COVID-19—a monumental sum nearly equivalent to the Department of Education’s entire annual discretionary budget. This plan would add tens of billions more.
Colleges have needed a course-correction for decades, and new federal subsidies will continue to enable general fiscal maladministration, avoiding necessary structural reforms, and changes at the university level that would actually reduce college costs.
For example, from 2001 to 2011, the number of non-teaching employees and administrators increased 50% faster than teaching faculty. Non-instructional staff now accounts for more than half of university payroll costs.
Ever-increasing college costs fueled in part by federal subsidies have muddied colleges’ value proposition. Across the country, tuition and fees for in-state students attending four-year universities have nearly tripled in real terms since 1990. Since 1970, inflation-adjusted tuition rates have quintupled at both public and private colleges.
Federal subsidies have increased dramatically, with spending on student loans rising 328 percent over the last 30 years, from $20.4 billion during the 1989-90 school year to $87.5 billion during the 2019-20 school year. As University of Ohio economist Richard Vedder explains:
[I]t takes more resources today to educate a postsecondary student than a generation ago… Relative to other sectors of the economy, universities are becoming less efficient, less productive, and, consequently, more costly.
This spending package, by adding another $40 billion in federal subsidies, will only continue this trend, fueling increases in higher education costs while shifting more of the burden onto taxpayers.
– Lindsey Burke is the director of The Heritage Foundation’s Center for Education Policy and the Mark A. Kolokotrones fellow in Education
The framework’s proposed spending on affordable housing will fund the efforts of D.C. bureaucrats to intrude on local housing policies in a concerted effort to socially reengineer communities through the Affirmatively Furthering Fair Housing Rule.
The Affirmatively Furthering Fair Housing Rule’s objectives are pursued by conditioning federal housing grants—particularly from the Community Development Block Grant program—on local governments approving affordable housing projects, transportation initiatives, and zoning guidelines preferred by the federal government.
The Trump administration suspended Affirmatively Furthering Fair Housing Rule in 2018, and terminated it in July 2020. Ben Carson, secretary of the Department of Housing and Urban Development, explained that the Affirmatively Furthering Fair Housing Rule is “unworkable and ultimately a waste of time for localities to comply with, too often resulting in funds being steered away from communities that need them most.”
The Biden administration restored the definitions and certification requirements of Affirmatively Furthering Fair Housing Rule in June 2021. Affordability concerns are best addressed by voluntary reforms of local land use regulations, eliminating rent control, and making it easier for landlords to evict non-paying tenants.
Down payment assistance will further stoke price increases in the price of housing—especially for lower and moderately priced homes most likely to be purchased by recipients of these grants. Although a select few purchasers may benefit from the proceeds, other families seeking to purchase homes will suffer from the increase in costs.
Furthermore, property tax burdens may increase as the valuation of these properties increases from this artificial injection of additional capital into the housing market.
– Joel Griffith is a research fellow focusing on financial regulations at The Heritage Foundation
The Biden administration has turned the U.S. immigration system into immigration chaos, and now the left wants American taxpayers to pay for it. The Democrats will continue to try to ram through amnesty using budget tricks. This will effectively reward illegal immigrants and will fuel the surge we are seeing play out every day at our southern border.
The Biden administration has itself to blame for inflating the backlog of immigration benefit applications. When they continue to add hundreds of thousands of illegal aliens to the application line, those who followed the law and apply for legitimate benefits are forced to wait years longer to have their application adjudicated.
What’s more, immigration benefits are fee-based. This is sound fiscal policy as applicants, not taxpayers, should pay for their own benefit application. To force U.S. taxpayers to pay for the Biden administration’s own backlog punishes Americans, fails to hold the administration accountable for their open border policies, and hurts lawful immigrants, their family members, and employers.
“Expanding legal representation” is a euphemism for taxpayer-funded attorneys for deportable aliens. Aliens already have a right to counsel in (civil) immigration proceedings, but at no expense to the government. The left has sought to chip away at this sound fiscal policy for decades, starting with illegal alien minors.
Requiring taxpayers to fund attorneys would be a fiscal bottomless pit, given the unknown millions of illegal aliens already in the country, plus the unending flow of illegal aliens currently crossing the border, plus the years’ long immigration court backlogs.
Furthermore, it would treat deportable aliens better than U.S. citizens, who do not have a right to taxpayer-funded attorneys in civil proceedings.
The left continues to ruin our asylum system while calling it “efficient and humane.” Asylum is intended to protect those who suffered or have a well-founded fear of persecution based on their race, religion, nationality, political opinion, or membership in a particular social group. Yet the left shoe horns in general violence, crime, and climate change into membership in a particular social group and labels them asylees.
Those conditions do not meet the definition for asylum and such applicants are not eligible. Watering down asylum to declare every applicant eligible hurts those who truly faced or fear real persecution. This is chaotic and inhumane.
The House Rules Committee is considering text that is different from the president’s framework language that would do the following:
- Provide amnesty to illegal aliens who entered the U.S. prior to January 1, 2010. The House text uses the little-known registry section of the Immigration and Nationality Act to legalize unknown millions of illegal aliens. This was the Senate Democrats’ “plan B” approach to amnesty, which the Senate Parliamentarian already rejected.
- “Recapture unused visas.” The Immigration and Nationality Act currently places an annual cap on family-based and employment-bases visas; the first to limit chain migration and the second to protect American workers. Also, under current law, “unused” visas are added to the next fiscal year cap, providing for two bites of the apple for utilization. Advocates of the House bill text ignore this current formula, ignore the purpose of visa caps, and seek unlimited visas.
- Accelerate adjustment of status to lawful permanent residence for visa petition beneficiaries whose visas are not immediately available due to annual caps. This would benefit corporations and universities, but ignore worker protections for Americans.
- Require several additional filing fees for U.S. Citizenship and Immigration Services.
- Appropriate $2.8 billion to decrease the U.S. Citizenship and Immigration Services backlog. As stated above, applicants, not American taxpayers, should fund application adjudications. To decrease the backlog, the U.S. Citizenship and Immigration Services should adjust its fees to eliminate many fee waivers and exemptions and the Biden administration should end its open border policies that put so many illegal aliens in the benefit queue, thereby increasing the backlog.
– Lora Ries
The latest version of the Build Back Better Act would raise the top individual income tax rate even higher than the prior House Ways and Means version of the bill did. Rather than directly raising the top personal income tax rate or creating a new tax bracket, the bill raises taxes by sneaking a surcharge on high income individuals.
The surcharge starts at 5% for taxpayers with modified adjusted gross income of $10 million and rises to 8% for taxpayer over $25 million.
The bill also would expand the 3.8% net investment income tax to apply to all net income, not just investment income. The top individual income tax rate (before these add-on taxes) is already set to increase from 37% to 39.6% in 2026. Adding this up yields a top federal income tax rate of 51.4%.
The Tax Foundation estimates that the average top marginal state and local tax rate is 6.0%, bringing the average top combined federal-state-local tax rate to 57.4%.
According to the Tax Foundation’s estimates, this is higher than the 2026 statutory income tax rate of every other country in the OECD, inclusive of subnational taxes.
Taxpayers in high-tax states and cities would have it even worse. Taxpayers in New York City face a top combined state and city income tax rate of 14.776%, meaning some Big Apple residents would have a staggering 66.176% total income tax rate.
It likely wouldn’t stop there, though. The taxes imposed in the Build Back Better plan are imposed for 10 years but fund the extravagant social agenda for fewer years. Any extensions of the programs would only push taxes higher. Worse, the looming crisis of existing unfunded entitlement programs could drive those exorbitant taxes yet higher.
House Democrats also released another bill this week that would modestly reduce Social Security’s shortfalls, by including an additional 12.4% payroll tax on income above $400,000. Our unfortunate New York City resident could then face a whopping 78.576% combined income tax rate.
This isn’t just money out of the pockets of wealthy individuals. This will stall business investment, drive down economic growth, and drive up unemployment. Entrepreneurship will slow to a crawl. Regardless of how one feels about individuals with very high incomes, the reality is that most of their money is used in ways that help small businesses start and grow, that leads to new and better products and services, and that creates jobs with rising wages.
Far fewer people will be willing to take risks or to invest in things that create widespread benefits if government will claim almost all the rewards.
– Preston Brashers and Rachel Greszler
IRS Slush Fund
The bill would provide a massive $79 billion slush fund for the Internal Revenue Service, paid in a lump sum and available to use through 2031.
This slush fund is about six times the IRS’ entire annual budget. The IRS had a $13 billion budget in 2021, including $5 billion for nearly 35,000 enforcement agents.
The bill would even give the secretary of the Treasury, “or the Secretary’s delegate,” “personnel flexibilities” to “to take such personnel actions as the Secretary (or the Secretary’s delegate) determines necessary to administer the Internal Revenue Code.”
There simply is no credible way for the scandal–ridden and union-dominated agency to absorb so much extra funding and power while avoiding waste, fraud, and abuse.
This slush fund raises the risk of returning to a politicized IRS. The IRS has a decades-long history of overreach and abuse, from the collecting of a list of enemies of the Nixon administration to attempting to fire a whistleblower who participated in a series of hearings on IRS abuse in the Clinton administration to the infamous targeting scandal under the Obama administration to the leak of confidential taxpayer records and associating the teachings of the Bible with a political party this year.
The bill would also provide $105 million to the Treasury’s Office of Tax Policy to issue new regulations and $153 million to the U.S. Tax Court.
– Matthew Dickerson
The framework includes $350,000,000 that will be allocated to the National Labor Relations Board for the fiscal year 2022. The funds will remain available until Sept. 30, 2026.
According to the Build Back Better plan, this money will be used to fund the implementation of electronic voting for union elections. The federal government should not involve itself in union elections. Unions should fund electronic voting through the dues they receive from their members.
As a self-professed “union guy,” Biden has strongly advocated for greater unionization in the U.S. workforce. American workers, however, do not seem to agree.
According to the Bureau of Labor Statistics, the union membership rate declined to 10.8% in 2020 with strong union presence among public sector workers. In fact, the union membership rate has been in decline for approximately the past 40 years.
The Biden administration’s plans to increase unionization are evidently misaligned with the needs of the current labor market. With long-term societal trends showing diminished union favorability, Biden insists on using taxpayer funding to support his political objectives.
Biden’s pro-union, anti-business economic policies are harmful to American firms, workers, and consumers. This provision uses taxpayer money to support union efforts, in essence, raising taxes on all Americans to provide a political giveaway to unions.
Unions are partially to blame for the supply chain crisis plaguing the Los Angeles and Long Beach ports. Strong union presence and restrictive operating procedures that resulted from union pressure and collective bargaining have left many Americans unconvinced that they should provide more of their earnings to support union activities.
With the salary of dock workers at the Los Angeles and Long Beach ports averaging $171,000 annually, it is difficult to argue that these union workers are unable to fund their own election infrastructure.
Aside from high costs, Biden’s unionization efforts promote lower productivity that typically coincides with union participation. At a time when Americans are struggling with a supply chain crisis and rising consumer prices that are partially a result of unions, Americans would be better served by an administration that is more focused on free enterprise and free market labor policies.
Now would be a good time for Biden to invoke his promise of unity and do what’s best for all Americans.
– Elizabeth Hanke is a research fellow focusing on labor economics and policy at The Heritage Foundation
The bill adds a hearing services benefit to the Medicare program, effective Jan. 1, 2024. The provision would reimburse “qualified” audiologists and physicians for providing a variety of hearing services, as well as reimbursement for hearing aids. Payment rates are to be set by the secretary of Health and Human Services, and $370 million is appropriated for the implementation of the program.
As anticipated, the bill does not add dental or vision coverage. That’s a good thing—because all these benefits are a solution in search of a problem. They duplicate coverage already provided in private supplemental coverage as well as Medicare Advantage plans. Thus, the provision continues the step-by-step government crowd-out of the private financing and delivery of coverage and care.
– Robert Moffit is a senior fellow focusing on health care and entitlement programs, particularly Medicare, at The Heritage Foundation
Medicaid and Medicare
The legislation assumes a larger role for the federal government in Medicaid. The proposal would create a new grant program within Medicaid that would add new federal funding for home and community-based services.
The proposal would also impose new federal requirements on state Medicaid programs, would allow states to remove certain income limits to qualify for Medicaid and the Children’s Health Insurance Program, and would weaken oversight and accountability through various policy changes.
Congress already provided significant federal Medicaid resources to the states, including for home- and community-based services earlier this year. Using Medicaid to solve the country’s health care woes is shortsighted and poorly targeted, and supplanting state flexibility with federal mandates only makes matters worse.
These efforts would drive out private alternatives and stretch an already overburdened safety-net program.
While the legislation drops dental and vision benefits, it still adds a new hearing benefit to the traditional Medicare program. To avoid an even bigger price tag, the benefit would be phased-in in 2024.
While traditional Medicare does not include dental, vision, or hearing coverage, Medicare Advantage—the private Medicare alternatives—already offers many of these benefits to seniors without government intervention or interference.
Not only does this proposal inject the government where it isn’t necessary, but also piles new obligations onto the already overdrawn Medicare program that will only accelerate the fragile fiscal circumstances facing the program.
– Nina Owcharenko Schaefer
Pre-K and Child Care
The framework includes $400 billion in new spending for universal pre-K and large child care subsidies that cap parents’ child care costs at 7% of families’ income for those earning up to 250% of the state median income (topping out at $429,000 for a family of four in D.C.). Both programs would initially be funded for six years.
Instead of reducing child care costs, expanding options, and helping more parents achieve the child care they desire, the proposals would drastically increase costs and restrict options to government-controlled providers.
A whole host of government dictates—such as requiring subsidized providers to pay “living wages” ($27 per hour for a single mom in Mississippi and $39 in Boston) and that all Pre-K workers have a bachelor’s degree (despite zero evidence that such degrees make someone a better caretaker)—would easily drive up costs by 50% or more.
And at the same time, the proposal would limit access to child care. In Chicago, the roll-out of universal pre-K is “strangling private day care,” as most parents send children to the government program, even if it doesn’t meet their needs. New Jersey’s “model” pre-K program has an accountability crisis and is wrought with political favoritism.
The proposed federal subsidies would likely be out-of-reach to faith-based providers, because in declaring them recipients of federal funds, it would compromise their ability to run their programs and hire workers according to their beliefs.
Pushing children into government-controlled, center-based child care that’s been shown to have negative impacts on kids’ and families’ long-term outcomes is not a sound “investment.”
In fact, the preeminent author of studies upon which these proposal are based, James Heckman, said, “I have never supported universal pre-school… Public preschool programs can potentially compensate for the home environments of disadvantaged children. No public preschool program can provide the environments and the parental love and care of a functioning family and the lifetime benefits that ensue.” He estimated that parental care has “rates of return of more like 30 or 40%.”
While this proposal provides nothing to the majority of disproportionately low-income parents who prefer family-based care, it would provide $30,000 in child care subsidies to a couple with $344,000 income and two children living in D.C.
If policymakers really want to help families in need, they should expand choices for existing child care funds, including allowing parents to use the roughly $10,000 per child worth of ineffective Head Start spending at a provider of their choice.
– Lindsey Burke and Rachel Greszler
Still to be determined is whether the bill will include provisions to impose government price controls on prescription drugs.
Previous versions would have the federal government set prices for certain prescription drugs in the Medicare program, based on prices paid in other countries. Companies that refused to accept the government price would be subject to an excise tax.
Government control over the price of pharmaceuticals means government control over access to pharmaceuticals. Like residents in those selected other countries, seniors would face less access and fewer choices under this model.
Moreover, government price controls would not end with pharmaceuticals. Similar mechanisms are envisioned with a full-blown government-run program, where the government sets payment rates for all health care services.
Americans only need to look to Canada and the United Kingdom to see the impact such controls have on access to care, where wait lists are common and expected, and where access to treatments are limited or denied.
– Nina Owcharenko Schaefer
State and Local Tax Deduction
Biden’s newest big government socialism framework makes no mention of repealing the cap on the deduction for state and local taxes—popularly known as “SALT.”
An important reform included in the Tax Cuts and Jobs Act was to cap the SALT deduction at $10,000. The SALT deduction subsidizes high taxes imposed by state and local governments. The primary beneficiary of the SALT deduction is high-income taxpayers in high-tax states. Prior to the cap being put in place, the average millionaire from New York or California deducted more than $450,000 per year of SALT, while the average Texas millionaire only deducted about $50,000 resulting in a federal tax liability nearly $180,000 higher than their high-tax state counterparts.
Restoring subsidies for high income taxpayers in high tax states has been a priority for some blue-state lawmakers that have said “No SALT, no deal”. There have been reports that Speaker Nancy Pelosi, D-Calif., and Rep, Richard Neal, D-Mass., chairman of the Ways and Means Committee, “have given NJ/NY Democrats assurance it will be in bill.”
Instead of this harmful proposal, Congress should finish the job and repeal the SALT deduction.
– Matthew Dickerson
Woke Gender Ideology
According to Senate rules, a reconciliation package should be limited to budget questions. But in 2021, the reconciliation process offers the chance for radical gender activists to slip the language and assumptions of their ideology into federal legislation.
For instance, the text on “Maternal Mortality” consists of 15 sections that appropriate funds for a range of grants and programs for research and education on women’s health.
And yet, in these sections discussing mothers who might face high-risk conditions related to childbearing, we find gender-neutral terminology repeated 18 times in more than half of the 15 sections. The most common phrase? “Pregnant, lactating, and postpartum individuals.”
While “individual” or “person” is common in legal documents when the referent could be male or female, that doesn’t explain what’s happening here. The use of vague, ungendered terms is an attempt to make legal language compliant with an ideology that denies the innate binary of male and female.
The newest reconciliation draft makes this agenda even more obvious.
In an earlier version, for instance, in a separate section on Medicaid, the text retained “pregnant and postpartum women”—since it was referring to past legislation. In the current version, this doesn’t slip through. Whereas before it referred to “pregnant and postpartum women,” it now calls for the offending “w” word (in the singular) with “individual.” To be clear, this is a deliberate erasure of the word “women.”
They did let a shocking reference to “she” slip through. (Perhaps they’ll catch that during the next round of edits.)
There is now only one use of “women” in the entire document that is not directly quoting a previous law. It’s here: “Assessing the potential causes of relatively low rates of maternal mortality among Hispanic individuals and foreign-born Black women.”
The trajectory is unmistakable: Whenever feasible, references to woman are being neutered. We’ve seen this Congress’ commitment to radical gender ideology since its opening days. In early January, House Speaker Nancy Pelosi, D-Calif., made gender-neutral language standard practice for Congress.
This approach persists even when the bill is dealing with topics unique to women. In 2021, opting to refer to a woman as a “pregnant, lactating, and postpartum individual” suggests that someone need not be a female to be pregnant, to lactate, or to suffer postpartum health complications.
That is, of course, exactly the point. For certain radical gender activists, being a woman is more a function of nurture and self-designation than nature and biology. That language reflects that conviction.
– Jay Richards, the William E. Simon senior research fellow in Heritage’s DeVos Center for Religion and Civil Society, and Jared Eckert a research assistant at Heritage’s DeVos Center for Religion and Civil Society
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