Build Back Better: Taxes, Technology, and Cybersecurity
The latest in a series.
Good afternoon. We hope you had a nice Thanksgiving.
Congress is back this week with a full schedule: A government shutdown deadline is on Friday, members will have to address the debt ceiling this month, and Democrats are debating how to proceed with President Joe Biden’s agenda.
The Uphill team has been slogging through the legislative text of the House-passed Build Back Better Act to deliver a more detailed breakdown of the notable spending items and programs included in the legislation. We covered its climate provisions here, its health care and housing provisions here, and its immigration and family policies here. Today, we have a bit of a grab-bag of sections. It’s not the most exhilarating reading, but we think it’s important to look at the details. (Hopefully we’ll be able to wrap up this series with only one more edition like this.) We primarily relied on the full text of the bill, which is available here, and a section-by-section summary available here.
Minimum tax: Build Back Better includes legal changes to implement the United States’ role in an international agreement between nearly 140 countries on how multinational corporations should be taxed.
Beginning in 2023, the legislation imposes a 15 percent minimum tax on foreign profits, an increase from the current 10.5 percent. A separate 15 percent minimum tax targets large companies based on their earnings.
State and local deduction: The legislation raises the state and local tax deduction cap from the current $10,000 to $80,000 beginning in the 2021 tax year. That level would last through 2030, returning to $10,000 in 2031.
The change would benefit the wealthy in high-tax, mostly blue states such as New York and New Jersey: According to the Tax Policy Center, the vast majority of benefits from the cap hike would go to earners in the top 20 percent—people earning $175,000 or more per year. About 70 percent of the tax benefits would go to those in the top 5 percent of earners, making $365,000 per year or more, according to the data.
Senators are currently eyeing a cap on the tax break for those with high incomes. The one House Democrat who voted against the legislation, Rep. Jared Golden of Maine, said he opposed it because of this tax cut for the wealthy.
Other taxes: The legislation imposes a 1 percent tax on corporate stock buybacks. It also applies a 5 percent surtax on adjusted gross income above $10 million, with an additional 3 percent tax on adjusted gross income above $25 million.
It levies new taxes on nicotine, amounting to $50.33 per 1,810 milligrams of nicotine in a given product. (A cigarette contains about 10 to 12 milligrams of nicotine, for reference.) The Tax Foundation has a helpful explanation and critique of how this provision is structured here.
Retirement plans: It also attempts to prevent the use of retirement plans as tax shelters. It would limit contributions to individual retirement accounts by wealthy taxpayers, blocking contributions to retirement plans after they exceed $10 million. This limit applies to individuals with incomes above $400,000, married couples filing jointly with an income above $450,000, and heads of households with income above $425,000. More details on the bill’s changes for retirement plans are available here, from CNBC.
IRS: The package also directs substantial resources to the Internal Revenue Service. Over the next decade, roughly $1.93 billion would go to taxpayer services and about $44.89 billion would go to boosting enforcement. About $27.38 billion over a decade would go to operations support, such as rent payments, printers, postage, security, and other expenses. An additional $4.75 billion over a decade is included for business systems modernization, such as enhanced customer service.
The legislation also directs $403 million through September 2031 to a Treasury Department inspector general’s office to conduct oversight of the IRS. $15 million is included for the IRS to prepare a report to Congress on the prospect of a free system to allow direct online filing of tax returns.
The nonpartisan Congressional Budget Office recently estimated the bill’s funding for tax enforcement would decrease the deficit by $127 billion over the next decade.
Same-sex marriage tax relief: The bill allows same-sex couples who were married under state law prior to 2010 to claim tax benefits retroactively, in some cases as far back as 2004.
Union dues and work fees: The package allows up to $250 in labor organization dues to be deducted from taxes, regardless of whether a given filer takes the standard deduction or itemized deductions. It also allows up to $250 in deductions for the cost of required employee uniforms of work clothing.
Local news: The bill includes a payroll tax credit for news organizations through 2025, of up to $25,000 for each local journalist the organization employs in the first year and $15,000 per local journalist in the following four years. It constrains recipients to only news organizations that are not funded by political action committees and those that disclose their owners, among other requirements, per the New York Times. It also limits the benefits to organizations that employ fewer than 1,500 journalists in a given location.
Next generation 9-1-1: The legislation appropriates $470 million, slashed from an original proposed $10 billion, to enable the implementation and maintenance of next generation 9-1-1 (NG911). NG911 is technology to modernize information-sharing with 911 call centers and make it easier for 911 centers to locate callers. The public would be able to share multimedia information such as texts, videos, and images with operators. NG911 would also allow operators to receive real-time data from other devices, such as personal medical devices or smartwatches. The bill includes $20 million for administrative costs, $9 million for establishing a NG911 Cybersecurity Center, and $1 million to create a 16-member advisory board. The funding lasts through September 30, 2030.
Connectivity: There are a number of measures designed to improve the nation’s access to broadband and connectivity. The Federal Communications Commission would receive $100 million to assist and inform the public about connectivity programs.
The secretary of commerce would receive $7 million to create a 14-member council that will recommend to Congress ways to develop and adopt advanced technologies such as 6G.
$295 million would go to the NTIA for public-private partnerships to improve broadband connection for low- and middle-income individuals in urban areas.
The bill also establishes a $475 million connected device distribution program that provides computers, laptops, and tablets to low-income households, along with $20 million that will go toward administration. The funding lasts through September 30, 2031.
Distance learning: $300 million would help schools and libraries provide internet connections to students and teachers. Democrats established the program the money would go to—the Emergency Connectivity Fund—in their coronavirus relief package earlier this year.
School closures highlighted the digital divide, with some students, often in rural communities, struggling to keep up with their peers because of a lack of consistent internet connection. The text forbids the purchase of devices or services from tech firms deemed a national security risk, such as Chinese companies Huawei or ZTE. The funding is available until September 30, 2030.
Manufacturing supply chain: To increase the resilience of manufacturing supply chains, the bill appropriates $5 billion to the Department of Commerce through September 2026. The money would go toward monitoring and mapping manufacturing supply chains, establishing standards, guidelines, and best practices, and speeding up the deployment of advanced technology to strengthen the supply chain.
Privacy enforcement: The Federal Trade Commission would get $500 million through September 2029 to open a bureau that will support its work protecting consumers’ privacy, data security, identity theft, data abuse, and other concerns.
Homeland security: The bill’s homeland security section primarily focuses on beefing up cybersecurity infrastructure and seeking to train more people in the field. The funds follow on the heels of large scale, disruptive ransomware attacks on U.S. companies like Colonial Pipeline, the Washington, D.C., Metropolitan Police Department, and the world’s largest meatpacker.
The bulk of the money is directed to the Cybersecurity and Infrastructure Security Agency (CISA). CISA would receive $100 million for cybersecurity risk mitigation, $15 million for various federal programs and grants related to training and mission support, and $100 million for collaboration with community colleges, historically black colleges and universities (HBCUs), and other programs on workforce development and education.
CISA would also get $35 million to help states, localities, tribes, and territories with cyber threat prevention, $50 million for CyberSentry, a new program launched last year that monitors traffic and detects malicious activity on critical infrastructure’s systems and corporate networks, $50 million to transition data to a secure cloud program, and $50 million for research and development.
The administrator of FEMA would receive $80 million in grants to recruit and train people on cybersecurity risks and threats. FEMA would also get $20 million for helping states, localities, tribes, and territories to move websites to more secure government internet domains.
Lastly, the Department of Homeland Security would receive $900 million through September 2028 for sustainability and environmental programs.
On the Floor
Both chambers are expected to consider a government funding package this week to avert a shutdown.
The House is also slated to take up several bills related to cybersecurity, opioids, and other topics under special expedited rules for uncontroversial measures. A full list of the bills the House is expected to consider this week is available here.
Senators will continue to debate the chamber’s version of the annual defense authorization bill.
Treasury Secretary Janet Yellen and Federal Reserve Chair Jay Powell testified before the Senate Banking, Housing and Urban Affairs Committee on the economy and pandemic response this morning. Information and video here.
Yellen and Powell will appear again before the House Financial Services Committee on Wednesday morning. Information and livestream here.
The Senate Homeland Security and Governmental Affairs Committee will hold a hearing this afternoon on making federal authorizations to use cloud technology within the government more efficient and more secure. Information and livestream here.
Witnesses from the National Academies of Sciences, Engineering, and Medicine will appear before a House Science, Space, and Technology subcommittee on Wednesday at 11 a.m. to discuss goals and challenges for astronomy and astrophysics over the next decade. Information and livestream here. A copy of the report is available for free download here.
The House Science, Space, and Technology Committee will hold another hearing Thursday on ensuring American leadership in microelectronics. Information and livestream here.
The House Transportation and Infrastructure Committee will hold a hearing Thursday morning on securing American infrastructure from cyber threats. Information and livestream here.