Legislation

Build Back Better Act

The Build Back Better Act is the central piece of President Joe Biden’s domestic agenda. The sweeping $2.2 trillion plan has passed the House of Representatives and currently awaits action in the Senate. It includes major changes to three main areas: social spending, climate, and taxes.

Social spending

More than half of the spending in the House-passed bill is devoted to expanding the social welfare state through two main buckets: funds to help families with children and spending on health care. There’s a catch to many of these provisions, however. To appease moderates within their ranks and keep the long-term costs of the bill down, Democrats have set several of the bill’s proposed new programs to last for only a limited time. Their hope is that they will end up being so popular that Republicans will agree to let the programs continue if they happen to be in power when it comes time for them to expire.

To help families with children, the Build Back Better Act would make the child tax credit significantly larger for all but the richest families. It would subsidize most or all of the cost for childcare for children under age six to make it affordable for more families. It would fund state expansions of pre-K programs. And it would direct the federal government to work through private insurers to help fund paid leave for workers who become new parents or who are seriously ill.

For health care, the big-ticket item in Build Back Better is about $146 billion for in-home care for seniors and the disabled through Medicaid. It also would broaden Medicare to cover hearing benefits, bolster the subsidies that help people pay for Obamacare individual insurance plans for a few more years, and allow the federal government to negotiate some prescription drug prices – hopefully driving those prices down as a result.

Climate spending

About a quarter of the bill’s spending, $500 billion over ten years, is devoted to climate and green energy initiatives. Most of this would take the form of tax credits meant to incentivize clean electricity and transportation as well as energy efficiency for property owners. This new tax regime for clean energy would last for the next decade. In addition to these tax credits, the bill also includes spending on reducing pollution, forest restoration, and other conservation programs.

Tax changes

The story of the Build Back Better Act’s new tax provisions is complicated. It purports to make up for much of its spending increases with higher taxes on some of the wealthiest people in the country and on corporations. These changes would raise an estimated $640 billion more in revenue over the next decade, per the Congressional Budget Office (CBO), a nonpartisan federal agency that provides budget and economic information to Congress. About $252 billion of this total would come from changes to the net investment income tax, $160 billion from limiting excess business losses, and $227 billion from a “surcharge” on wealthy individuals, estates, and trusts, only applying to about the wealthiest 0.2 percent of Americans.

At the same time, however, the bill makes changes to the state and local tax (SALT) deduction that would massively cut taxes for many less wealthy but still quite well-off people. This change would cost federal revenues $229 billion over its proposed span.

In addition to its three main areas, there is a smattering of additional spending on different issues and projects, including more funds for existing affordable housing programs, as well as measures to give unauthorized immigrants temporary work permits and increase legal immigration.

Negotiations

The CBO estimates that the current version of the legislation without sunsets on certain social safety net provisions would "increase the deficit by $3 trillion over 2022 to 2031." This analysis assumes, however, that any extension wouldn't be paid for with tax increases or other revenue streams to make up for the costs. Currently, there are no extensions to the provisions in the bill.

Shortly before the Build Back Better Act was set to be brought to the Senate floor for a vote in December, Sen. Joe Manchin (D-W.Va.) effectively torpedoed the bill’s chances by saying that he wouldn’t vote for it. In a Senate split 50-50 between each party, Democrats cannot afford a single defection for any of their proposed legislation to pass. That gives moderate Democrat Senators like Manchin and Arizona Sen. Kyrsten Sinema a lot of leverage in negotiations over parts of the bill that they disagree with (or parts that might not be as popular with their constituents).

Senate Democrats put the Build Back Better Act on the backburner in January due to objections from Sen. Manchin. Instead, they will be focusing on debating voting rights legislation and holding a vote on changing the Senate's filibuster rule. Manchin has said publicly that no further progress has been made on the bill, but some news outlets have reported that he is open to reengaging on the climate and child care provisions.