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Top areas of House budget package that could see changes

Vast measure is described as 'social safety net and clean energy' package

Democratic Sen. Joe Manchin III's concerns are a major theme running through several potential sticking points in the big reconciliation bill before the House.
Democratic Sen. Joe Manchin III's concerns are a major theme running through several potential sticking points in the big reconciliation bill before the House. (Tom Williams/CQ Roll Call file photo)

The House is gearing up to consider a roughly $2 trillion budget reconciliation package this week sprawling across 2,135 pages and encompassing the work of 13 committees.

The vast measure, which is still being analyzed by the Congressional Budget Office, is mostly described as a “social safety net and clean energy” package.

But its scope runs the gamut, including things like money for local tourism boards, seafood import monitoring and a new Great Lakes icebreaker for the Coast Guard. And it would implement some long-sought Democratic policy initiatives, such as removing the threat of deportation for undocumented immigrants and imposing steep financial penalties on employers that violate labor laws.

The package has already been scaled back considerably, dropping numerous tax increases and a more expansive prescription drug pricing regime, and its price tag has been cut roughly in half. House Democratic leaders have made changes to mollify both progressives and moderates in their caucus, as well as their colleagues in the Senate, and to attempt to make the package fit within the Senate’s “Byrd rule” that puts strict limits on what can be included in a filibuster-proof reconciliation bill.

But still more changes are likely if the expansive bill, a top priority for President Joe Biden, is to become law. Below are some of the chief areas that may need to be tweaked, or dropped altogether, before landing on Biden’s desk.

Paid leave

The House bill would create a federal paid family and medical leave benefit, the first of its kind in the United States. Starting in 2024, it would provide up to four weeks of leave at wage replacement rates that start at about 90 percent and scale down for higher earners. For example, someone making $62,000 annually could receive around 68 percent of their regular salary during their leave period, based on a summary.

The White House estimates the program would cost about $194 billion over a decade. For Sen. Joe Manchin III, D-W.Va., that’s too much spending for a new entitlement program at a time when major established programs like Medicare and Social Security are slowly running out of cash to pay full benefits. And with Manchin’s vote critical to passage in the evenly divided Senate, Democratic leaders can’t ignore his wishes.

Sen. Kirsten Gillibrand, D-N.Y., and others have been trying to persuade Manchin to relent, but he’s consistently said such a major undertaking should be bipartisan and go through “regular order,” not be enacted through a fast-track budget bill. “It looks like it won’t be a component of this package,” Treasury Secretary Janet L. Yellen said in an interview that aired Sunday on CBS’ “Face the Nation.”

Immigration

Backers of a pathway to citizenship for millions of undocumented immigrants have already floated multiple plans to try to pass muster with the Senate’s parliamentarian, Elizabeth MacDonough. The key problem is that opening up avenues for undocumented immigrants to live and work in the U.S. have been deemed to have “merely incidental” impacts on the federal budget — a Byrd rule violation. In other words, the underlying policy goal is considered to be the more important reason for the change than affecting federal spending.

The latest attempt to convince MacDonough is a set of provisions in the revised House bill that would offer “parole” status — typically granted for urgent humanitarian or “significant public benefit reasons” — of up to five years initially. That parole period, applicable to individuals who entered the U.S. prior to Jan. 1, 2011, can be extended but not beyond Sept. 30, 2031. Parolees would be granted work and travel permits and deemed eligible for Real ID-compliant driver’s licenses.

If the parliamentarian doesn’t agree, however, the offending provisions are vulnerable to a point of order requiring defenders to muster 60 votes to keep them in the bill.

‘SALT’

After a drawn-out caucus debate, House Democrats finally agreed on a tortuous path to relief from a $10,000 cap on state and local tax deductions that mainly affects constituents in a small number of blue states. The latest version would raise the cap to $80,000 but extend it through 2030, or five years after the current cap was set to expire altogether. Then in the final year, the cap would snap back at $10,000 before expiring again.

This bit of budgetary maneuvering would actually raise about $14 billion over the full decade, according to preliminary estimates, but provide as much as $285 billion in tax benefits in the first five years, the Committee for a Responsible Federal Budget says. At the same time, it has a skewed effect on the distribution of taxes under the overall bill: According to the Tax Policy Center, some two-thirds of millionaire households could see their taxes cut under the measure, a far cry from campaign rhetoric about making the wealthy “pay their fair share.”

Overall, tax increases for the remaining one-third — likely many of those making more than $10 million who’d be hit with a “surtax” — outweigh the smaller tax cuts. But it’s still an issue in the Senate, where Budget Chairman Bernie Sanders, I-Vt., and Bob Menendez, D-N.J., are prepping an alternative to leave the “SALT” cap in place but phase it out for those earning somewhere above the $400,000 to $550,000 vicinity.

Electric vehicles

The House bill would put in place a new consumer tax credit worth up to $12,500 for purchase of electric vehicles to replace the current maximum $7,500 credit that phases out once an automaker sells more than 200,000 qualifying vehicles. The new credit would be refundable, or fully available to consumers even if they don’t have big enough tax bills to offset.

In one big catch, the credit would phase out once vehicle purchasers make at least $250,000 if they’re single filers and $500,000 if they are married and file jointly. That’s already a compromise with Manchin and others who said the previous limits of $400,000 and $800,000 were too rich. But it looks like party leaders will need to compromise with Manchin once again on a major plank of the proposal: incentives to build electric cars, vans and trucks with union labor.

Manchin, who represents a Toyota facility in his home state that plans to make components for electric vehicles, last week said he opposes language in the House bill that would add $4,500 to the tax credit for vehicles assembled in the U.S. at unionized plants. Michigan lawmakers and others are vowing to keep it in the bill, while Toyota and other nonunion automakers have been lobbying to scrap it. It’s come under fire from various U.S. trading partners as an unfair and discriminatory subsidy, and there are also questions about whether it can survive a Byrd rule scrubbing.

Methane emissions

House Democrats scaled back their proposed fee on excess emissions of methane, a powerful greenhouse gas, from oil and natural gas facilities above certain thresholds in response to concerns from Texas Democrats and others concerned about impacts on their constituents.

The fee, renamed a “charge” in the latest text, would start at $900 per ton of excess methane waste in 2023 and ramp up to $1,500 in 2025, rather than impose the full amount starting in 2023. It would provide a tenfold increase in funding, to $775 million, to help affected companies comply. Democrats added an exemption from the fee for companies that haven’t yet obtained environmental permits for equipment needed to trap and gather the excess gas.

But even if those and other fixes mollify enough Democrats from oil- and gas-heavy regions, it remains to be seen whether Manchin will get on board. His state is the fifth-largest natural gas producer, and the industry is already under pressure due to recent price spikes as winter approaches. American Gas Association President and CEO Karen Harbert said earlier this month that the reconciliation bill’s “natural gas tax would increase energy bills for families by at least 12 percent while increasing energy imports from foreign countries and providing little to no environmental benefit.”

Vaping tax

The House bill initially proposed a nearly $97 billion tax increase on tobacco and nicotine products, including doubling the existing cigarette tax and applying equivalent taxes to vaping products like e-cigarettes. Most of that was scrapped after an outcry from convenience store operators and others concerned about the effects on households earning less than $400,000, whom Biden has pledged to protect from tax increases.

What’s left in the revised text is nearly $9 billion in revenue from keeping current taxes where they are but extending them in roughly equivalent form to vaping products and nicotine pouches. But critics such as the American Vaping Association say the new tax could actually be higher to buy a Juul pod, for example, than on a traditional pack of cigarettes because of their size, which could have the effect of leading more people to smoke instead of vape. And it still would hit individuals making below $400,000.

Manchin recently expressed opposition to the vaping tax. Nevada Sen. Catherine Cortez Masto, a vulnerable in-cycle Democrat, told The Wall Street Journal she’s against it as well, calling it a “regressive” tax that hits lower-income people harder than others.

Lindsey McPherson, Joseph Morton, Laura Weiss, Caroline Simon and Suzanne Monyak contributed to this report.

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