House Passes Build Back Better Bill

November 19, 2021

On Nov. 19, the House passed by a vote of 220 to 212 the Build Back Better reconciliation bill (H.R. 5376) that includes more than $1.5 trillion in business, individual tax increase provisions. All but one Democrat — Rep. Jared Golden (D-Maine) — voted for H.R. 5376; all Republicans voted against the bill. 

The House was initially waiting to hold the vote before the Congressional Budget Office (CBO) scored the measure, which they did on Nov. 18. The CBO projected an overall net cost of $1.7 trillion over 10 years for the bill’s package of targeted individual tax relief that includes an expanded child tax credit, clean energy incentives, and increased spending on healthcare, education, childcare, and other programs. After accounting for net tax revenue effects and other offsets, the CBO projects that the legislation would increase federal deficits by $367 billion over 10 years.

The CBO’s $367 billion deficit projection does not include estimated savings from increased Internal Revenue Service (IRS) enforcement funding. The CBO estimates that measures in the bill providing an additional $80 billion for IRS tax enforcement efforts would increase revenues by $207 billion through 2031. This would reduce CBO’s projected $367 billion deficit cost for the legislation to $160 billion. The Treasury Department had projected $480 billion in revenue gains from increased IRS compliance measures in the legislation, which led the White House to assert that the cost of the Build Back Better legislation was more than offset with increased tax revenues.

The Build Back Better Act contains several concerning provisions that could be harmful for small businesses –including four-week federal paid family and medical leave program for all workers without regard to employer size. NSBA believes employees and employers should be able to determine for themselves the allocation of compensation between money, paid sick leave, paid vacation leave, health insurance, retirement, and other employee benefits. There is no approach that meets the needs of all employees or employers. It also adds harmful labor provisions including penalties for violations under the NLRA, personal liability for officers and directors, tax credit for union-produced electric vehicles and mandatory neutrality agreements for direct care grants. Further, it applies a 3.8 percent net investment income tax (NIIT) to all income earned by S-corporations and partnerships. This tax was enacted as part of the Affordable Care Act, and it was designed to apply to passive investment income, not the income from active businesses where their owners run the business. For a full list of what is contained in the bill that may impact small businesses, please visit the NSBA checklist.

The Senate currently is expected to begin action on H.R. 5376 in early December, after Congress returns from a Thanksgiving holiday recess. Some provisions of the House-passed Build Back Better legislation are expected to be revised by the Senate, which would then require further action by the House. A final identical version of the legislation must be approved by both the House and Senate before President Biden can sign it.