This Week In Washington

Latest news from Washington, D.C. produced by Total Spectrum/SGA exclusively for members of the Arizona Chamber of Commerce & Industry

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Thanks for your interest in Washington, D.C., and thanks for reading This Week in Washington. 

There was a flurry of last-minute activity in the Senate over the last few days, and I summarized what happened this week – and what happens next – in this week’s Heard on the Hill.

My colleague Congressman Erik Paulsen was a member of the House Ways and Means Committee and served as Chairman of the Joint Economic Committee. He has written a series of articles this year about the economy, and his latest is about President Biden’s proposed 15% global tax and how it could hurt American workers.

We’re going to kick back for a few days, and then start planning the next editions of This Week and Total Spectrum Spotlight. Trust, however, that we’ll provide you with immediate updates and analysis on anything you need to know between now and then.

Stay cool and stay safe.

Steve Gordon, Managing Partner

Heard on the Hill

By Steve Gordon, Total Spectrum Strategic Partner

One of the best – and most accurate – lines of the 40-plus years I’ve been in Washington is that staff and consultants never want to stand in the way of Senators and Congressmen heading to Washington National Airport on the way home for August recess. 

Washington National Airport has since been renamed to Ronald Reagan Airport, but the rest of that line is still correct. 

The Senate’s August recess was tentatively scheduled to begin late last week. But Majority Leader Schumer told his Senate colleagues that they would stay in Washington until the Bipartisan Infrastructure Framework bill passed and the budget resolution for the next fiscal year was approved.  

Both these bills passed, and the Senate left for the airport early this morning. They joined members of the House of Representatives, who had already left town for their August recess.  

Infrastructure Bill

It is often said that spending money on infrastructure is like the old Irish saying: everybody wants to go to heaven, but nobody wants to die. Everybody wants new roads, new bridges, and more infrastructure like broadband, but nobody wants to pay for them – and the best example is the highway gas tax, which hasn’t been raised since the 1970’s and never was indexed to account for inflation. 

We must give a lot of credit to the Gang of 10, but especially their leaders, Senators Kyrsten Sinema (D-AZ) and Rob Portman (R-OH), for getting this legislation over the goal line. They put the gang together, comprised of five Democrats and five Republicans, and then got buy-in from 10 additional Senators. They also got buy-in from President Biden, who campaigned on rebuilding the bipartisan legislating process, and who from all indications negotiated with both Senators in good faith. 

Passing this bill was never a forgone conclusion. Committee Chairmen were not pleased to have been cut out of the process. Progressives were not pleased that Democrats were working with Republicans on the bill, and it’s certainly true that progressives are far more interested in the social infrastructure part of the President’s program. It’s also true that former President Trump opposed the bill, and he encouraged his supporters around the country to do the same. 

The final vote was 69 for the bill and 30 opposed. (Senator Rounds (R-SD) missed the vote spending time with his ailing wife, but he said that he would have voted against the bill). Minority Leader McConnell supported the bill, saying that Republicans can’t be against everything the President supports. 

The total cost of the bill is over $1 trillion, but much of the bill was paid for by making use of unspent funds already appropriated by COVID legislation. (They call that reappropriating). Other offsets to the spending came from the sales of future spectrum auctions, petroleum from the nation’s oil reserve, and a provision that will ensure that cybercurrency investors pay taxes on their profits. 

The Congressional Budget Office said that the legislation would add $256 billion to the federal budget deficit over the next 10 years. Senator Kevin Cramer (R-ND), a member of the Senate Budget Committee, said that the CBO didn’t give the bill enough credit for reappropriating unused funds. 

The main categories of the bill include:

  • Highways – highway programs, bridge investment, tribal, territory, and federal lands,
  • Climate Change and Alternative Vehicles – programs to make infrastructure more resilient to storms and natural disasters, carbon reduction, electric charging stations and alternative fuel infrastructure,
  • Regulatory – codifying the Trump Administration’s policy to force federal agencies to coordinate their review and authorization decisions,
  • User Fees – sets aside funds to study a national motor vehicle per mile user fee to supplement the Highway Trust Fund,
  • Emergency Appropriations for highway programs from the general fund instead of the Highway Trust Fund,
  • Amtrak and Other Rail Grants,
  • Aviation emergency appropriations,
  • Drinking water and water infrastructure,
  • Energy Grid Security, and
  • Broadband,
  • as well as many other sections. 

President Biden proposed spending over $2.3 trillion for customarily defined infrastructure and broadband. The bipartisan legislation spent about $550 billion in new money not previously appropriated. 

The bill now goes to the House of Representatives, where the Speaker has a very narrow majority. It’s presumed that many Republicans will follow former President Trump’s lead and vote against the bill when it comes up in the House, so the Speaker will have to couple the bipartisan infrastructure bill with something her Progressive members want to bring her Democratic caucus into line. 

Senate Budget Resolution on Social Infrastructure

The Senate Budget Committee passed President Biden’s infrastructure bill on a party-line vote. The Budget Committee approved a bill that would spend $3.5 trillion, and early Wednesday morning, the full Senate passed the budget resolution on a party line vote of 50-49. Now the resolution goes over to the House, where the Speaker is bringing Members of Congress back to Washington the week of August 23rd to consider it. After the resolution is passed by both the Senate and the House, it will go to committees to build a legislative agenda that can be passed in the Senate using the reconciliation process, which allows some types of legislation to be passed with a simple majority. 

In a letter dated August 9, Majority Leader Schumer describes the content of the budget resolution, which President Biden proposes to pay for by raising corporate tax rates, individual tax rates for some people, and estate taxes. 

My colleague Congressman Erik Paulsen has written a series of articles on how raising taxes will impact individuals, businesses, and our economy.

At the end of the day – which probably will be near Christmas – the actual size of this social infrastructure bill will be decided by Senator Sinema and Senator Joe Manchin (D-WVA). 

In a press release shortly after this morning’s vote on the resolution, Senator Manchin offered this reflection:

Over the past year, Congress has injected more than $5 trillion of stimulus into the American economy – more than any time since World War II – to respond to the pandemic. The challenge we now face is different: millions of jobs remain unfilled across the country and rising inflation rates are now an unavoidable tax on the wages and income of every American. These are not indications of an economy that requires trillions in additional spending. Every elected leader is chosen to make difficult decisions. Adding trillions of dollars more to nearly $29 trillion of national debt, without any consideration on the negative effects on our children and grandchildren, is one of those decisions that has become far too easy in Washington. 

The Biden 15 percent global tax puts foreign companies ahead of American workers

By Congressman Erik Paulsen, Total Spectrum Strategic Consultant

President Biden recently spearheaded an agreement among the G-7 nations to implement a global minimum corporate tax rate of 15 percent. The agreement has received the support of 130 other countries including China, Russia, and India. Notably withholding their support are several major tax havens, including Ireland, Hungary and others. 

The agreement, if fully implemented, would reduce competition among the world’s major economies and secure a tax funding base for financially strapped nations, particularly those in Europe, with bloated social spending budgets. President Biden says the agreement shows that “America’s back.” However, the agreement would surrender America’s tax sovereignty to a coalition of nations who believe in high taxes and huge government spending. The tax is an essential part of President Biden’s plan to greatly expand the role of the federal government in America’s economy at a level not seen since World War II.  

The Tax Cuts and Jobs Act that was passed in 2017 created economic growth in America that eclipsed the economies of most of the G-7 countries. This tax reform eliminated the minimum corporate tax and reduced the top corporate tax rate to 21 percent, incentivizing U.S. companies to invest here at home instead of overseas. The United States hung out an “Open for Business” sign which attracted billions of dollars of investment and generated explosive job growth not seen in decades. 

President Biden and many Democrats in Congress are working vigorously to reverse this growth. Their support for a global minimum tax is one of at least 30 proposed tax increases on American families and businesses that will total around $2.975 trillion over the next 10 years. These tax increases include raising the top corporate tax rate to 28 percent, which, when state taxes are included, balloons to an average rate of 32 percent. This is significantly higher than the average corporate tax rate of most nations in Europe (23 percent) as well as China (25 percent). 

The global minimum tax is also subject to significant manipulation by nations seeking to gain an edge through offsets and work arounds. China’s state-controlled media already is calling for massive exemptions. Russia and India are likely to follow suit. Most significantly, many tax haven countries like Ireland who have seen their economies grow rapidly due to their low tax regimes are not expected to sign on to the minimum tax.  

Treasury Secretary Yellen calls the current tax policies of China, Russia, India, Ireland, and other nations a “race to the bottom” to attract business at the expense of their budgets. Another term for this is competition, so it is easy to predict that that even if the global corporate tax agreement is ratified, many of these nations will find a way to undermine it to better compete.   

President Biden’s tax policies amount to a surrender in this race for business. He is not only pressing for the global minimum tax, but he is basing its implementation in the United States on book income rather than taxable income, further disadvantaging American companies over foreign workers and companies.  

Should the Biden global minimum corporate tax go into effect, those losing most will be American consumers and workers. By eliminating competition, this tax, on top of his other tax increases, will make America even less competitive and drive jobs, manufacturing, innovation and investment overseas. It will encourage the flight of business to those nations, like Ireland, who do not sign on or to countries like China, who will effectively ignore the tax while making a show of agreeing to it. 

The American economy is just beginning to emerge from the damage wreaked by the pandemic. We are also engaged in fierce competition with China, which is seeking to become the world leader in technology and other critical industries. Instead of restricting competition with a 15 percent global minimum tax that is nothing more than a gift to China, the United States should be pursuing low tax policies that welcome investment and will secure our nation’s position as the leading economy in the world.  

Congressman Erik Paulsen represented Minnesota’s 3rd District from 2009 to 2019. He was a leading member of the chief tax writing Ways and Means Committee. He was also the Chairman of the Joint Economic Committee, which focuses on innovation, entrepreneurship, digital trade, and economic issues.

This op/ed originally appeared in The Hill on July 26, 2021. The views expressed in this article are the writer’s own.

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Congressional Calendar

All times EDT

Tuesday, August 10

  • 10 a.m. Senate Foreign Relations Near East, South Asia, Central Asia and Counterterrorism Subcommittee hearing to examine U.S. security assistance in the Middle East.

Wednesday, August 11

  • 10 a.m. Senate Judiciary Committee hearing to examine pending nominations.

Thursday, August 12

  • 9 a.m. Senate Judiciary Committee business meeting to consider S. 1787 (117), which would prevent antitrust cases filed by states from being transferred to other states, and S. 2502 (117), which would grant first-time, low-level, nonviolent simple drug possession offenders an opportunity to expunge their conviction by completing a court-imposed probation.

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