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Biden’s $2.25 Trillion American Jobs Plan Includes Substantial Housing, Community Development, Climate Change/Green Energy, and Tax Reform Proposals

Published by Peter Lawrence on Wednesday, March 31, 2021 - 12:00AM

Today the Biden administration released a fact sheet on the proposed American Jobs Plan, its $2.25 trillion infrastructure proposal. Among the many “traditional” transportation, energy and communications infrastructure provisions, the plan proposes major investment in housing, community development and climate change/green energy.

The $2.25 trillion American Jobs plan includes revenue raising offsets as part of President Biden’s “Made in America” tax plan, which the administration claims will “fully” pay for the plan within the next 15 years and reduce deficits thereafter.

Highlights of housing and community development proposals:

  • Building, preserving or retrofitting more than 2 million affordable and energy-efficient homes with an investment of $213 billion through “targeted tax credits, formula funding, grants and project-based rental assistance”
  • Enacting the Neighborhood Homes Investment Act (S. 98/H.R. 2143) to build and rehabilitate more than 500,000 homes for low- and middle-income homebuyers
  • Eliminating exclusionary zoning and harmful land use policies, and provide grants to incentivize these steps with state and local governments
  • Providing $40 billion to improve public housing “infrastructure”
  • Providing funding for energy efficient upgrades in homes through block grants programs, the Weatherization Assistance Program, and home and commercial efficiency tax credits, as well as a $27 billion clean energy fund
  • Investing $20 billion in 10 regional innovation hubs and a Community Revitalization Fund to support innovative, community-led redevelopment projects that can spark new economic activity, provide services and amenities, build community wealth, and close the current gaps in access to the innovation economy for communities of color and rural communities that have suffered from years of disinvestment

The administration says such housing and community development proposals would “create jobs that pay prevailing wages, including through project labor agreements with a free and fair choice to join a union and bargain collectively.”

Highlights of climate change/green energy proposals:

  • Proposing a 10-year extension and phase down of an expanded direct-pay investment tax credit and production tax credit for clean energy generation and storage
  • The fact sheet says, “These credits will be paired with strong labor standards to ensure the jobs created are good-quality jobs with a free and fair choice to join a union and bargain collectively.”
  • Establishing an Energy Efficiency and Clean Electricity Standard (EECES) aimed at cutting electricity bills and electricity pollution, increasing competition in the market, incentivizing more efficient use of existing infrastructure, and continuing to leverage the carbon pollution-free energy provided by existing sources like nuclear and hydropower
  • Pairing an investment in 15 decarbonized hydrogen demonstration projects in distressed communities with a new production tax credit to spur capital-project retrofits and installations that bolster and decarbonize the nation’s energy industry
  • Proposing a $174 billion investment in electric vehicle market and infrastructure

Highlights of “Made in America” Tax Plan:

  • Increases the corporate tax rate to 28 percent
  • Increases the global minimum tax on U.S. corporations to 21 percent and calculate it on a country-by-country basis
  • Establishes 15 percent minimum tax on corporation “book” income
  • Replaces the Base Erosion and Anti-abuse Tax (BEAT) from 2017 tax reform
  • Eliminates Foreign Derived Intangible Income (FDII) tax incentives from 2017 tax reform
  • Proposes to make it harder for U.S. corporations to invert
  • Repeals fossil fuel industry tax preferences
  • Increases investment in IRS audits and enforcement

The Biden administration is expected to couple the American Jobs Plans with another long-term economic recovery plan focusing on “human infrastructure” costing to be about $1.75 trillion, bringing the total cost of both plans to be about $4 trillion.

Given the expensive overall cost of the plan and the proposed revenue raising offsets, the plan is not expected to have any Republican support, and therefore Democrats in Congress are likely to turn to budget reconciliation to consider it. The first step needed for that option is Biden’s fiscal year (FY) 2022 budget request. The Biden administration is expected to submit a “skinny” version of the FY 2022 budget request this week with the top-line budget details necessary for a FY 2022 budget resolution. This “skinny” request would be followed some weeks later by the detailed budget request with program-by-program funding details and the U.S. Treasury’s “Greenbook” of tax proposals, which will likely provide further details on the “Made in America” tax plan. With those submissions, Congress would work on a FY 2022 budget resolution, which could include reconciliation instructions for infrastructure and other priorities.

While Congress was able to enact a COVID-19 reconciliation bill earlier this year relatively quickly, it was much easier for Congressional Democrats to pass FY 2021 budget resolution to include the reconciliation instructions for COVID-19 relief because Congress had already passed a FY 2021 spending bill in December.

It will be much harder and take more time to pass a FY 2022 budget resolution to unlock the process for a reconciliation bill to pass infrastructure legislation. With the loss of three House Democrats to the administration—former Rep. and now HUD Secretary Marcia Fudge, former Rep. and now Interior Secretary Deb Haaland, and former Rep. and now White House Director of Public Engagement Cedric Richmond—House Democrats have the narrowest margin in decades. Furthermore, now that the Budget Control Act discretionary spending caps have expired, there is no statutory or otherwise agreed upon budget level for defense and nondefense spending. Given the ideological diversity in the House Democratic Caucus, passage of a FY 2022 budget resolution and subsequent reconciliation bill is far from guaranteed. And with the 50-50 Senate, any Senate Democrat could derail the budget resolution and subsequent reconciliation bill.

However, if a FY 2022 budget resolution with reconciliation instructions is passed, it could provide a legislative vehicle for low income housing tax credit (LIHTC), new markets tax credit (NMTC), historic tax credit (HTC), and renewable energy tax credit (RETC) proposals.  Stand-alone legislation to enact these proposals have been reintroduced and are expected to be introduced soon. Recently the New Markets Tax Credit Extension Act of 2021 (H.R. 1321/S. 456) was introduced with strong bipartisan support, and tomorrow Reps. Earl Blumenauer, D-Oregon, and Darrin LaHood, D-Illinois, are expected to introduce the Historic Tax Credit Growth and Opportunity Act (HTC-GO) Act of 2021, with the Senate companion bill to follow later. The Affordable Housing Credit Improvement Act of 2021 is expected to be introduced the week of April 12. And House Ways and Means Select Revenue Measures Subcommittee Chairman Mike Thompson, D-Calif., introduced the GREEN Act, which would extend the renewable energy Production and Investment Tax Credits, among other provisions.

As mentioned in the American Jobs Plan, the Neighborhood Homes Investment Act (NHIA, S. 98/H.R. 2143) was introduced earlier this year, and Senate Finance Committee Chairman Ron Wyden, D-Oregon, is expected to introduce comprehensive housing legislation soon which will likely include among its many provisions his proposal to create a middle income housing tax credit.

The American Jobs Plan shares many elements with the Moving Forward Act, which passed the House last July and includes LIHTC, NHIA, NMTC, HTC and RETC provisions. If Congress passes a FY 2022 budget resolution with reconciliation instructions, the House is likely to combine elements of both in an infrastructure reconciliation bill.

Timing for the FY 2022 budget resolution is unclear, but the House is currently aiming to consider it in May and June, with the Senate to follow. The August recess will likely serve as an informal deadline on a final FY 2022 budget resolution.  If Congress passed a final FY 2022 budget resolution, then the fall and early winter would be a likely timeframe for a reconciliation bill, with the holidays serving as the informal deadline to act. Stay tuned.

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