Neal eyes massive coronavirus relief, climate and infrastructure package
The House Ways and Means chairman wants to 'go big'
House Ways and Means Chairman Richard E. Neal’s attitude toward legislating under a Democratic-led White House might aptly be described as “never let a crisis go to waste.”
The Massachusetts Democrat wants to take a page from his party’s 2009 playbook, when the Obama administration took office amid the wreckage of the financial crisis and enacted a nearly $800 billion stimulus that went as far afield as clean energy and infrastructure spending.
President-elect Joe Biden oversaw that effort as vice president, and Neal sees potential to reprise something like it on a grander scale.
“I do think with a President Biden that stimulus linked to climate change and linked to infrastructure go hand in hand,” Neal said in an interview. “Why don’t we wrap them into one big bill, and given the Fed’s determination to keep interest rates low, we can do some borrowing.”
Based on proposals House Democrats have put forth since this summer, the cost could go north of $4 trillion over a decade. That includes a $2.4 trillion coronavirus aid package and a $1.5 trillion infrastructure and climate measure.
Neal said the size and scope could be influenced by whatever Congress and the outgoing Trump administration can get done in the lame-duck session on COVID-19 relief.
Neal allows that “I think there are some revenue offsets we could use” if lawmakers get cold feet about racking up all that debt. But he points to all the unpaid-for tax cuts enacted under GOP administrations going back to President Ronald Reagan in 1981 as a contrast to the investments he thinks are necessary.
“I think that the federal government is positioned to do the necessary obligation we have, and that is to build infrastructure,” Neal said. “I think Henry Clay and Andrew Jackson had the same argument. It’s not like it just burst on the scene.”
Maximizing support
Getting such an expansive bill through the Senate would be difficult. Republicans are favored to control the chamber next year, though they still need to win at least one of the two Georgia Senate runoffs on Jan. 5. Even if Democrats retake control with a 50-50 split and a tiebreaking Vice President Kamala Harris, it’s not clear there would be enough support.
But Neal said his energy tax package, for example, is designed to attract bipartisan backing by framing efforts to curb greenhouse gases as tax cuts to boost a lackluster economy. Instead of a carbon tax or big-spending Green New Deal proposals, for instance, Neal included a roughly $150 billion package of clean energy tax incentives in the infrastructure bill the House passed July 1.
About half of that cost would be extending credits for installing solar, geothermal, fuel cell and other renewable power systems, while expanding the credits to defray expenses associated with energy storage technology, like batteries. Other provisions would boost the availability of tax credits for electric vehicle purchases and residential home energy and efficiency improvements; and create new tax credits for labor costs associated with installing renewable and energy-efficient property.
There are also extensions of popular tax credits for wind-powered electricity and biodiesel fuel made from soybeans, which enjoy support on both sides of the aisle. And renewable power developers would be able to set up structures known as “master limited partnerships” that can raise capital in public equity markets but aren’t subject to corporate tax. So-called MLPs are popular in the oil and gas industry but haven’t been available for investors in wind, solar and other alternative energy companies.
“My belief is that the best way to attack climate change is now going to have to be through tax incentives,” Neal said. “I think that if we used tax incentives on the climate side there might be a more receptive audience given some of the intransigence that we’ve witnessed.”
Neal also says tax incentives for domestic manufacturing may have a place in pandemic relief or other legislation. Biden has proposed a 10 percent tax credit for domestic investments, for example, which the Urban-Brookings Tax Policy Center estimates would cost $230 billion over a decade.
Neal didn’t elaborate on specific proposals, but noted that “one of the things the pandemic has reminded [us of] is that America was caught back-footed on some of the manufacturing issues, including the masks and ventilators.”
And predating COVID-19 by decades was the decimation of industries like the hand tool manufacturers in Western Massachusetts who gradually migrated to Asia in search of lower costs. “I do think that it makes some sense to talk about some tax incentives to bring back whatever domestic manufacturing we can,” Neal said.
Retirement savings, refundable credits
Neal also is looking to move a bipartisan retirement savings bill and to renew expiring tax breaks.
The retirement bill was negotiated by Neal and ranking member Kevin Brady, R-Texas. It is a collection of proposals meant to induce Americans to save more for their retirement, including a proposed increase in the age for required minimum distributions from 401(k)s and other tax-favored retirement plans from 72 to 75 years old, and an expansion of the saver’s credit for lower-income households.
Meanwhile, the annual squabble over renewing expiring tax breaks could take on extra significance next year. There are more than 30 tax breaks expiring at the end of this year, including an end to big excise tax cuts for small brewers, wineries and distillers. Then there are the temporary tax breaks added in March as part of a big coronavirus relief package, including the suspension of aviation excise taxes for the struggling airline industry.
An expansion of child tax credits and earned income tax credits for lower-income households has long been a top priority for Neal and House Democrats. They’ve pushed a variety of bills over the last two years to expand both credits, and to make the child tax credit fully refundable. Top Democrats since last year have tried to tie the renewal of business tax extenders to expanding the refundable credits, and have pushed their GOP counterparts to agree to include them in the next coronavirus aid package.
“I hesitate to put anything out there until we’ve got some idea of what the big package is going to look like,” Neal said.
Additionally, general tax breaks for businesses in the 2017 tax code overhaul are nearing their sunsets. Companies have been able to fully expense their research and development expenses since 2018, but that ends in 2022. Likewise, bonus depreciation, which allows companies to immediately write off 100 percent of certain expenses normally depreciated over years, begins phasing out in 2023.
“The tax staff, we’re talking about it,” he said. “We want to, I think, negotiate based on the backdrop of the pandemic. So, whatever we do there I hope will have a stimulant effect as well.”
Whatever doesn’t get done in the lame-duck session will get held over until the 117th Congress, when Neal has a new dance partner at the Senate Finance Committee: Michael D. Crapo, R-Idaho, if Republicans hang onto the Senate, or Ron Wyden, D-Ore., if Democrats take over.
Neal knows Wyden well and got along with current Finance Chairman Charles E. Grassley, R-Iowa, over the past two years. But he said he knows little about Crapo, who’s coming over from the Banking Committee he’s led since 2017.
Neal blames the different structures in the House and Senate and within the two parties; in the House, members tend to focus their work on one committee and stick with that. On the other hand, in the Senate there’s a “pretty wild” system among Republicans in that chamber due to term limits, Neal said.
“I must tell you I’m fascinated by parts of it where you just rotate from committee to committee because your time comes up,” Neal said. “Where I spent a career working on the Ways and Means Committee trying ever so hard to master pretty arcane tax policies.”