Debt Ceiling Increase Enacted as House Democrats Consider Cuts to $3.5 Trillion Reconciliation Bill
President Joe Biden yesterday signed a $480 billion increase in the federal government’s debt limit to $28.9 trillion, narrowly avoiding an Oct. 18 national default deadline. The debt increase – passed by the Senate last week and the House on Tuesday – sets the stage for another fiscal cliff negotiation in less than two months, when both the debt limit and funding for the government run out on Dec. 3. (Associated Press, Oct. 14 and Reuters, Oct. 13)
- Democrats this week continued to struggle on how to cut the scope and cost of the $3.5 trillion “human” infrastructure bill, after an intraparty split between moderates and progressives postponed a vote on a scaled-down bill in the House. (Wall Street Journal, Oct. 1)
- House Speaker Nancy Pelosi (D-CA) set an Oct. 31 target date to pass revised legislation under the budget reconciliation process, which requires a simple majority in the 50-50 Senate to bypass Republican opposition. (Bloomberg, Oct. 2)
Cuts and Scale
- Pelosi sent an Oct. 11 letter to her caucus members as they work to cut Biden's reconciliation proposal from $3.5 trillion to approximately $2 trillion. “Overwhelmingly, the guidance I am receiving from Members is to do fewer things well,” Pelosi wrote. (PoliticoPro, Oct 13)
- On Oct. 12, Pelosi also commented on possible cuts to the length of certain spending programs, stating, “What would be the first to go? ... the timing would be reduced in many cases to make the cost lower.” (News conference transcript)
- In the Senate, Majority Leader Chuck Schumer (D-NY) yesterday sent a letter to his fellow Democrats urging unity as they consider a scaled-back infrastructure bill. “To pass meaningful legislation, we must put aside our differences and find the common ground within our party. As with any bill of such historic proportions, not every member will get everything he or she wants,” Schumer wrote. (Associated Press, Oct. 14)
- Real Estate Roundtable President and CEO Jeffrey DeBoer will participate in an Oct. 21 Marcus & Millichap webinar on the state of play in infrastructure proposals, the industry’s tax policy concerns and the possible impact on commercial real estate. (Register here)
- The tax bill passed by the House Ways and Means Committee does not include restrictions on like-kind exchanges, taxation of gains at death, ordinary income treatment for carried interest, and tax parity between capital gains and ordinary income. The Roundtable argued that these Biden administration tax proposals could harm job growth, local tax revenue, and the economic recovery.
- As negotiations continue on a multi-trillion reconciliation proposal, The Roundtable is urging lawmakers to ensure that any final agreement on tax changes to fund a bill would treat pass-through businesses fairly and equitably. The current reconciliation bill in the House would raise the top marginal income tax rate on many pass-through business owners from 29.6% today to 46.4% (a 57% increase).
- The Roundtable believes this level of increase on pass-through businesses was unintended by Members of Congress and could undercut the bill’s own objectives of stimulating job growth, improving housing availability, and promoting investment in economically struggling communities, among other priorities.
- Roundtable members and others are encouraged to reach out to their Representatives and contact their Senators to urge them to preserve the 20% deduction for pass-through business income (section 199A), which is directly tied to hiring workers and investing in capital equipment and property. Modest adjustments in the legislation would ensure that pass-through businesses will continue contributing to economic growth, innovation, and job creation. Background information and talking points can be found here.
Additional tax issues affecting CRE are summarized in The Roundtable’s summary on Real Estate Tax Issues and Budget Reconciliation Legislation.
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Biden Administration to Ease Pandemic Travel Restrictions; Senate Hearing Considers Legislation to Support Travel and Tourism Economy
The Biden administration today announced that fully vaccinated travelers from Mexico and Canada will be allowed to enter the United States starting Nov. 8 for “non-essential purposes, including to visit friends and family or for tourism.” The easing of travel restrictions provides a renewed opportunity for international travel to boost domestic economic growth. Additionally, next month will see the end of a pandemic-driven, 18-month ban on travel from 33 countries, including members of the European Union. (Reuters, Oct. 15 and New York Times, Oct. 12 | Oct. 8)
- The easing of travel restrictions could help rejuvenate the U.S. tourism industry and commercial real estate’s hospitality and retail sectors, which have been hit hard by the pandemic. Inbound international travel may help CRE through increased spending at hospitality, retail, attractions, health, and investment properties, generating revenues and creating American jobs. According to Marketwatch, relaxed travel restrictions may also
lead to an increase in foreign investment in U.S. real estate.
- Secretary of Homeland Security Alejandro Mayorkas stated, “Cross-border travel creates significant economic activity in our border communities and benefits our broader economy.” He added, “This new travel system will create consistent, stringent protocols for all foreign nationals traveling to the United States – whether by air, land, or ferry – and accounts for the wide availability of COVID-19 vaccinations.” (DHS news release, Oct. 12)
- Senate Majority Leader Chuck Schumer (D-NY) this week commented, “Since the beginning of the pandemic, members of our shared cross-border community have felt the pain and economic hardship of the land border closures. That pain is about to end.” (Schumer news release, Oct 12)
- The American Hotel & Lodging Association (AH&LA) also issued a Sept. 15 report on how hotels are projected to end 2021 with a loss of 500,000 jobs and more than $59 billion in business travel revenue compared to 2019. (AH&LA news release | state-by-state breakdown | market-by-market breakdown)
Bipartisan Senate Efforts
- The Senate is preparing legislation to boost inbound travel and tourism to the United States, according to a Sept. 21 Senate Commerce subcommittee hearing chaired by Sen. Jacky Rosen (D-NV), above.
- Executives from AH&LA and the U.S Travel Association testified at the hearing, entitled Legislative Solutions to Revive Travel and Tourism and Create Jobs.
- Rosen, who leads the Subcommittee on Tourism, Trade, and Export Promotion, announced that bipartisan legislation is in the works to “support the recovery of the travel and tourism economy in the wake of the COVID-19 pandemic and help us build a brighter future for businesses and workers in this key sector for every state in our nation.” (Rosen news release, Sept. 22)
- The imminent Omnibus Travel and Tourism Act would establish permanent federal leadership on travel policies, invest in public-private partnerships to increase visits to the U.S., and create a task force to address the pandemic’s impact on air travel. (BGov, Sept. 21)
Full committee ranking member Roger Wicker (R-MS) added his support for the emerging bill, saying that the nation’s travel and tourism challenges are a “bipartisan issue.”
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