From Historic Conservation Funding to Farmer Debt Relief, Who Will Pay for Biden's Revised Build Back Better Plan?

After a wild week of policy debate in Washington, Democrats on Capitol Hill are striving to push ahead with the new version of the Build Back Better plan (BBB), while also trying to secure a vote on a separate infrastructure package this week. With billions of dollars carved out for biofuels and beefing up conversation efforts and incentives, the plan also includes a large boost for minority farmer and rancher debt relief. The Build Back Better plan could have a wide impact on agriculture, but the biggest question remains as to how Congress will pay for such a massive plan. 

The proposal is now $1.75 trillion and is almost 25,000 pages long, according to Farm Journal Washington Correspondent Jim Wiesemeyer. The scaled-back BBB plan also includes an expansion in USDA's debt forgiveness program.

According to Wiesemeyer's newsletter, This Week Ahead, a congressional contact noted, "Not only did they expand the debt forgiveness, but they also made it tax exempt.”

Wiesemeyer reports the $6 billion the White House and Democratic leaders show for the program is really $11 billion. Why? The current BBB legislative language rescinds the previous $5 billion for debt forgiveness currently held up in court battles and moves that funding to the proposed expansion of the program.

A Senate Ag Committee release states the debt relief includes $6 billion for underserved farmers, ranchers and forest landowners in high-poverty areas, as it:

• Provides full and partial debt forgiveness on direct loans and offers loan modification services to USDA direct and guaranteed borrowers to keep their operations resilient and avoid economic disaster.
• Gives additional assistance to historically underserved producers living in high-poverty areas to address credit barriers, land access and a lack of technical help.
• Allows farmers or ranchers who experienced past discrimination in USDA credit programs to apply for additional assistance of up to $500,000.

How to Pay for the Plan

One of the largest sticking points for the GOP is how the president will pay for the plan. At this point, previous proposals, like the "Billionaire Tax" discussed last week, are off the table as well as the highly debated step-up in basis that was pushed by USDA Sec. Tom Vilsack earlier this year. While an ERS report said the change wouldn't impact the majority of farmers, other economic analyses found the contrary. 

Instead, it will come as a surtax on millionaires, as well as a hefty tax on corporations. 

Wiesemeyer says, "The funding mechanism for the BBB package is no longer a wealth income tax but instead a surtax on wealthy Americans. Under the tax, wealthy Americans will pay an additional 5% tax on income over $10 million and an additional 3% on top of that on aggregate gross income over $25 million. The billionaire income tax faced opposition from several Democrats, including Sen. Joe Manchin (D-W.Va.). Democrats also appear to be in consensus mode regarding imposing a 15% corporate minimum tax rate. If so, the two programs could go a long way toward funding the around $1.75 trillion package."

Vilsack also reiterated the fact farmers won't pay for the most recent plan. 

"I'll tell you what, there's nothing but good news here," Vilsack told AgriTalk's Chip Flory. "I know on previous shows, you all were concerned about the stepped-up basis and all that. Well, it's not that the people are paying for this. Our corporations have made more than a billion dollars and didn't pay any tax and individuals who make more than $25 million a year. They're going to pay a little extra tax, and I think they probably can afford a little extra."

Beyond the surtax, other changes to help pay for the plan include:

• Corporate minimum tax ($325 billion). Corporations that earn more than $1 billion in annual profits would face a 15% minimum tax rate. The Tax Foundation estimates this would affect 230 companies.
• Tax on stock buybacks ($125 billion). A corporation buying back its own stock would pay a 1% surcharge on the transaction. That is unlikely to affect corporate buyback plans or affect stocks — unless it goes up.
• Corporate foreign profits tax ($350 billion). Separate from the 15% minimum tax on U.S. profits, U.S. businesses would also pay 15% on foreign profits.
• Medicare tax on active pass-through income ($250 billion). Owners of pass-through businesses such as S corporations and partnerships would be subject to a 3.8% Medicare tax passed under President Barack Obama. It would apply to active, not passive, incomes — typically salaries, as opposed to investments.
• Limit on business loss deductions ($170 billion). Biden’s release on Thursday mentioned this provision, but without any detail. It may draw upon an earlier proposal from the House Ways and Means Committee to limit companies’ ability to carry forward losses for deductions to one year.
• Gain from more IRS funding ($400 billion). The bill would expand the IRS’ compliance and enforcement operations. Each year, an estimated $400 billion goes unpaid. The new muscle would primarily be used to go after noncompliant taxpayers earning at least $400,000 a year.

What to Watch

While the hot-button tax issues previously introduced aren't on the table, Wiesmeyer says there's a small chance that piece could change if progressives get the votes for additional spending and a more scaled-up BBB Plan.  

Wiesemeyer reports, "While changes to stepped-up basis, capital gains taxes and a billionaire tax are not likely, tax sources signal the following potential items to watch: 

• Reducing the estate-tax exemption. A proposal to reduce the estate-tax exemption from $11.7 million per person to around $6 million has been on the table since Biden’s campaign. The Tax Cuts and Jobs Act just about doubled the exemption in 2018 but scheduled it to return to its 2017 level with an inflation adjustment in 2026.
• Changes to a wealth-transfer tool. Many lawmakers want to significantly limit the benefits of a grantor trust, one of the most popular wealth-transfer tools. A proposed change could make assets held within a grantor trust return to the estate or make transactions between individuals and their grantor trusts taxable events."

BBB Plan as it Sits Today

Overall, there are other measures in the scaled-down version of the BBB plan as it stands today that will impact agriculture. That includes the following boost for biofuels:

   - $1 billion in funding for the biofuels industry
   - A four-year extension of the $1 dollar biodiesel tax credit
   - Plans to develop "sustainable aviation fuels"
   - $320 billion in clean energy tax credits
   - $110 billion for investments in clean energy technology
   - $105 billion to address extreme weather

The updated BBB plan also includes a significant boost for additional conservation programs, to the tune of $27 billion.

"The new conservation funding would go to programs like the Environmental Quality Incentives Program (EQIP), Conservation Stewardship Program (CSP) and the conservation easements effort," reports Wiesemeyer.

“When was the last time we invested $27 billion over a couple years in conservation programs," asked AgriTalk's Flory. "Never," said Vilsack. "There’s $27 billion in additional assistance for forests to help avoid these catastrophic forest fires."

Vilsack also highlighted the series of tax credits that could help boost biofuels, or what he deemed as low carbon fuel.

“There is a specific appropriation of $1 billion for the industry," said Vilsack. “Secondly, there are a series of tax credits the industry could potentially take advantage of as it formulates low carbon fuel, and the combination of those two is a very positive aspect.”

Wiesemeyer reports there are also possibilities for biofuels and/or ethanol production facilities to "be able to store carbon, to sequester carbon and there is a potential tax credit that they can benefit in the bill for that kind of storage capacity.”

Wiesemeyer also pointed out there will be an opportunity for the industry to participate in developing sustainable aviation fuel (SAF), something which Vilsack noted is a potential market of some 35 billion gallons.

Is it a Passable Plan?

So far, it's not just members of the GOP party who oppose the president's plans. There's also divisions over the scaled-down plan in his own party. Several top progressive priorities are gone from the plan, including paid family and medical leave. They also have voiced the fact they want to see a vote on key climate and social policies. However, there seems to be optimism that both the BBB and infrastructure plans can make it to a vote this week.