U.S. Capitol
U.S. Capitol

In November, the U.S. House of Representatives passed the Biden Administration-backed “Build Back Better” social spending and climate bill and sent it to the Senate. Here is a quick look.


The House-passed bill will almost certainly be modified to meet the demands of senators from both sides of the aisle. Its cost is generally estimated to range from $1.7 trillion to $2 trillion — lower, if some senators have their way, and potentially higher if expiring provisions are made permanent.



While we wait to see what the Senate does with Build Back Better (BBB) and, if it emerges from the Senate in any form, how the two houses reconcile their versions, it’s worth taking an inventory of what the House-approved legislation proposes to do and how its initiatives would be funded.




The following highlights are summarized from recent articles in the



Wall Street Journal



,



Forbes



,



Time


,



and the



Journal of Accountancy


.



MAJOR SPENDING INITIATIVES



Climate


. Of the proposed spending, more than a quarter – approximately $555 billion – is for climate initiatives, including $320 billion in tax credits for renewable energy, electric vehicles, and clean-energy manufacturing. The remaining $235 billion would address effects of climate change and develop and purchase renewable energy and other energy technologies.



Children


. To benefit low- and middle-income families, about $300 billion would be spent to build child care facilities, train and hire teachers, expand and extend the Child Tax Credit, and otherwise subsidize costs of care. Another $60 billion would be used to pay for the first three years of a universal prekindergarten program for three- and four-year-olds.

Healthcare


. The BBB would reduce health insurance premiums for Americans who are covered by Affordable Care Act policies and expand Medicaid coverage. Medicare recipients would see a reduction in out-of-pocket costs, have their coverage expanded to include hearing care, and, starting in 2024, have a $2,000 yearly cap on out-of-pocket costs for the voluntary prescription drug benefit. The bill would also empower the government to negotiate the price of certain drugs that are covered by Medicare. Total healthcare-related spending would be approximately $165 billion.

Elder Care


. To shift elder care away from nursing homes and hospitals, $150 billion would be used to provide senior and disabled persons with more in-home care.



Paid Leave.



For employees and self-employed persons, the BBB provides funding for up to four weeks (20 work days) of parental, sick or caregiving leave, at a cost of $200 billion.


Housing


. The BBB includes $150 billion for affordable housing initiatives, including $65 billion for repairs of public housing, $25 billion for rental assistance, and $15 billion to subsidize private development of low-income housing projects.

Immigration


. Under a temporary form of deportation protection, undocumented immigrants would be allowed to work legally in the United States. Costs associated with that initiative and other forms of immigration reform total approximately $100 billion.

College


. Pell Grant awards would be increased by $550, to about $7,000 per student per academic year.



TAX INCREASES



Build Back Better’s initiatives would be paid for, at least in part, by a new 15% corporate minimum tax (for companies with over $1 billion in profits), a 1% surcharge on companies that perform stock buybacks, and disallowing the 75% and 100% exclusion of gain from the sale of stock if the taxpayer’s AGI is over $400,000 or if the taxpayer is a trust or estate.

BBB also would impose the following tax increases on high-income individuals:

  • a 5% surtax on adjusted gross income above $10 million;

  • an additional 3% on adjusted gross income above $25 million; and

  • for high-income business owners, a 3.8% tax on active business income.



High-net-worth taxpayers may find some comfort in the apparent preservation of the $11.7 million estate tax exemption. (In September, a tax proposal announced by the House Ways and Means Committee would have reduced the exemption to $5 million.)

Also, a rumored “wealth tax” that would have been levied against the value of one’s assets did not make it out of the House.