July 29, 2021 - As Congress begins debating the bipartisan infrastructure plan, organizations seem to be falling all over themselves to endorse the plan without knowing one key piece of the puzzle: HOW DO THEY PROPOSE WE PAY FOR IT? I should emphasize at the very start we are guessing because the President and Congress are working on a bill that has not yet been written, so all we have are fact sheets and second-hand news.
Politicians are great at coming up with ways to spend our money. As employers, you know there is only so much that can be done through redirecting other funds, cost savings, etc., and sooner or later, you have to have additional cash.
Well, it probably comes as no surprise that President Biden has a plan. In the official White House fact sheet issued yesterday, the Administration simply says:
"In the years ahead, the deal will generate significant economic benefits. It is financed through a combination of redirecting unspent emergency relief funds, targeted corporate user fees, strengthening tax enforcement when it comes to crypto currencies, and other bipartisan measures, in addition to the revenue generated from higher economic growth as a result of the investments."
Any words jump off the page at you? Perhaps "targeted corporate user fees" and "other bipartisan measures?"
We decided to dig deeper and see how they plan to fund this $1.2 trillion spending plan.
In another fact sheet issued on June 24, 2021, the White House listed some "Proposed Financing Sources for New Investment." So, grab your wallet and let's see what they may have planned for you.
UNEMPLOYMENT INSURANCE PROGRAM INTEGRITY:
Is the Biden Administration counting on recovering unemployment taxes erroneously paid during COVID? This is not likely since they have told state labor departments they do not need to recover erroneously paid federal overpayments that occurred during the COVID emergency. Could this mean they are going to crack down on unemployment fraud? Shouldn’t they already be doing that? If so, how is that new revenue?
Is it more likely the Biden Administration may be counting additional revenues that may come from expanding the definition of “independent contractor,” or simply enhancing enforcement of the multiple definitions of "independent contractor" used by different federal agencies, trying to count independent contractors as “employees,” and hitting employers with a big bill for back employment taxes? Perhaps, but we don't know for sure.
EXTEND EXPIRING CUSTOMS USER FEES:
We are not sure how much these fees would generate, but we have to wonder how the functions funded by the current fees would be funded if they extend the expiring fees and redirect the money to the infrastructure plan?
SUPERFUND TAX REINSTATEMENT:
The American Chemistry Council said, "The proposed reinstatement of outdated Superfund taxes—new excise taxes on 42 chemicals and other materials—will increase the cost of a variety of consumer goods, including many of the very materials needed for infrastructure development and climate improvement." American Chemistry Council, Statement on Bipartisan Infrastructure Deal, July 28, 2021.
Some sources believe the 42 chemicals are the ones shown below and that these expired taxes may be revived at DOUBLE these rates in the expired law:
The expired tax is the following amount per ton of the following chemicals:
Acetylene $4.87
Benzene $4.87
Butane $4.87
Butylene $4.87
Butadiene $4.87
Ethylene $4.87
Methane $3.44
Naphthalene $4.87
Propylene $4.87
Toluene $4.87
Xylene $4.87
Ammonia $2.64
Antimony $4.45
Antimony trioxide $3.75
Arsenic $4.45
Arsenic trioxide $3.41
Barium sulfide $2.30
Bromine $4.45
Cadmium $4.45
Chlorine $2.70
Chromium $4.45
Chromite $1.52
Potassium dichromate $1.69
Sodium dichromate $1.87
Cobalt $4.45
Cupric sulfate $1.87
Cupric oxide $3.59
Cuprous oxide $3.97
Hydrochloric acid $0.29
Hydrogen fluoride $4.23
Lead oxide $4.14
Mercury $4.45
Nickel $4.45
Phosphorus $4.45
Stannous chloride $2.85
Stannic chloride $2.12
Zinc chloride $2.22
Zinc sulfate $1.90
Potassium hydroxide $0.22
Sodium hydroxide $0.28
Sulfuric acid $0.26
Nitric acid $0.24
If these taxes were indeed doubled, not only would manufacturers of these chemicals face higher taxes, but so would manufacturers using these chemicals to produce other products. Eventually, these taxes would be reflected in prices of consumer products.
EXTEND MANDATORY SEQUESTER:
While we don’t know exactly what is meant by extending the mandatory sequester, one could speculate the intent is to extend the current sequester for FY 2022. According to the “OMB Report to the Congress on the BBEDCA 251A Sequestration for Fiscal Year 2022,” renewed sequestration could generate $24.2 billion in savings, but some of the budgetary victims of this plan may not find this so attractive.
There could be a potential impact to Medicare funding. Although the CARES Act suspended the Medicare sequestration from May 1, 2020, to December 31, 2021, extending the sequestration could produce $16.7 billion. In addition to Medicare cuts, “Other Health Centers” sequestration could produce $75 million. Because these would be unpopular cuts, one wonders if the Medicare funding and healthcare funding may be exempt in this bipartisan infrastructure proposal, but we don’t know because details are not yet available.
Non-defense sequestration could produce more than $6.3 billion in savings. Part of this may be cost recovery from a reduction in funding for the student loan program, to the tune of around $51 million.
Defense sequestration may result in a reduction of $1.099 billion for non-exempt defense spending. Defense spending is extremely important in Missouri and is one of the few things most people agree our federal government should do: protect us.
TOTAL SEQUESTRATION REDUCTIONS FOR FISCAL YEAR 2022
Medicare, 2.0% reduction = $16.707 billion
Other Health Centers, 2.0% reduction = $75 million
Non-Defense spending, 5.7% reduction = $6.309 billion
Defense spending, 8.3% reduction = $1.099 billion
Total Reduction $24.191 billion
ALL OF THIS IS SPECULATION because the bill has not yet been written. Because we don’t yet know how the actual funding of the proposal will work, Associated Industries of Missouri urges caution. The government is great at taxing Peter to pay Paul, so we are hesitant to rally around a proposal that may victimize all employers using independent contractors, chemical companies, manufacturers, defense contractors and others to pay for this bipartisan infrastructure plan.
We will stay tuned and keep you posted of any news regarding the details of the bipartisan infrastructure plan. Hopefully someone will be able to answer these questions before the U.S. Senate passes this bill. And by the way, President Biden has been very clear that the bipartisan infrastructure plan is linked to the Democrat-only spending package that carries a current price tag of $3.1 trillion. Wonder how that one is paid for?