Yahoo Finance’s Rick Newman explains the road ahead for President Biden’s Build Back Better Act and Democrats' tax plans.
EMILY MCCORMICK: We're tracking the latest on the discussions in Washington, DC on President Joe Biden's Build Back Better bill. Yesterday, Biden was out with a statement acknowledging the sweeping social spending and climate policy legislation is unlikely to pass this year, but that work will continue, quote, "over the days and weeks ahead." Earlier today, Senate Majority Leader Chuck Schumer echoed these sentiments. Let's hear what he had to say.
CHUCK SCHUMER: Yesterday, I had a good discussion with the president and the speaker, where we talked about ongoing negotiations on finalizing the Build Back Better Act so we can pass it through the Senate. The president requested more time to continue his negotiations, and so we will keep working with him, hand in hand, to bring this bill over the finish line and deliver on these much needed provisions.
EMILY MCCORMICK: We have Yahoo Finance's own Rick Newman with us now. And Rick, given these statements, what is the timeline looking like right now for more progress on the Build Back Better bill? And what are the hurdles still left to clear?
RICK NEWMAN: Well, President Biden, as you mentioned, he said days and weeks ahead. So the question is, what does that mean? I think the understanding is that Democrats, there's no reason they had to get this done in 2021. I think there was just a hope that the end of the year, just the turning of the calendar would be sort of a deadline that would force them to get to the finish line. It didn't. They did not resolve all their differences. And this can carry on into 2022.
What they still need to resolve, this might seem sort of hopeless, like the Democrats really seem like they're flailing on the outside. But they have made some progress here. They have basically agreed on the amount of money to spend. That's about $1.7 or $1.8 trillion. So everybody, including those couple of holdouts, Joe Manchin and Kyrsten Sinema, are fine with that number. And that's down a lot from earlier this year.
The question is now what exactly to spend that money on. And one of the big sticking points seems to be whether they should do just a one year increase in the expanded child tax credit. That's expensive, and in order to keep that bill at $1.7 trillion, you can only do that for one year.
So that seems pretty gimmicky to guys like Senator Joe Manchin. And I think he'd prefer something that's more stable, either scale back the things, but make it stable for five or-- five years or longer, or else kill the whole thing and just spend all the money on something else. So that's what Democrats are going to be negotiating among themselves about as 2022 arrives.
KARINA MITCHELL: Well, if this thing doesn't get done before the midterms, does it then die, or does it get through in some shape or form? And what exactly do they need to drill down on and change to get this thing through and get Manchin on board?
RICK NEWMAN: Yeah, I guess a practical deadline is probably-- I would think if this is not done by February, it's not going to get done because if Democrats cannot figure this out by then, it just gets harder and harder to do as midterm elections draw closer. And if they're really that divided among themselves, they should just give up. That would be viewed as an epic fail, given that they are pretty close.
And this is really their last big legislative effort. After this, not much else is going to get done in a midterm election year. And there's a broad expectation that Democrats will lose control of the House next year and not be able to pass this kind of legislation. So they should know they need to get this done pretty soon, pretty quickly in 2022, or it's over. And who knows when they'll get another shot at it?
EMILY MCCORMICK: Well, Rick, something I know you're also closely following has to do with tax changes and tax reform. What are you seeing now in terms of the tax changes that we could expect in 2022 that perhaps didn't happen this past year?
RICK NEWMAN: I think this is an overlooked story for 2021. At the beginning of the year, market analysts were looking at all the tax increases President Biden wanted to impose to pay for his social welfare plans, his green energy plans, and almost none of them are going to materialize. It's pretty clear the Democrats are not going to raise the corporate income tax at all.
They're not going to raise the individual income tax rate at all, not even on wealthy people. There's going to be no change in capital gains taxes. There's going to be no change in inheritance taxes on the wealthy. There are some much smaller tax increases, such as a surcharge on people who earn more than $10 million a year, but that's peanuts compared with what Biden started talking about earlier this year.
So this is basically good news for markets. I mean, think about at the beginning of the year how many analysts we had on saying, oh, if these tax hikes go up, it's going to affect this sector and this company. And we think the markets will be OK, but we're not sure. Nobody's even talking about this anymore.
So there's really no concern among market analysts that higher taxes are going to be a significant issue for markets in 2022. So you can decide that's good. If you're an investor, I guess you think that is good. If you wanted some of that revenue to pay for more generous social programs, maybe you wish taxes were going up more. But they're just hard to get done, tax hikes.
EMILY MCCORMICK: They certainly are. All right, thank you so much for that update, Yahoo Finance's Rick Newman.