The Biden administration-backed “Build Back Better” (BBB) tax and spending bill went back to the drawing boards when Sen. Joe Manchin (D-WV) announced he would not support the current version of the bill on Dec. 19.
BBB’s health care and housing provisions contain “the single largest permanent increase in work disincentives since the income tax came into its own during World War II,” writes Casey Mulligan, former chief economist of the President’s Council of Economic Advisers in the Trump administration, on his blog. BBB would “reduce work by limiting competition in the labor market, imposing employer mandates, and increasing consumer prices for telecommunications, energy, and other products,” writes Mulligan.
“The implicit employment and income taxes in BBB would increase marginal tax rates on work by about 7 percentage points,” writes Mulligan. “I expect that such a change in the disincentive would reduce full-time equivalent employment by 4.5 percent, or about 7 million jobs.”
More Obamacare Subsidies, Penalties
BBB could resurface in future legislation or federal regulations, adding to preexisting work disincentives created by a host of federal, state, and local tax, spending, and regulatory mandates, says Mulligan. Being employed is a major barrier to receiving benefits from any of the programs under BBB, says Mulligan.
“Especially, BBB allows even America’s highest-income households to participate in subsidized ‘Obamacare’ insurance plans as long as they are not engaged in any job that offers health insurance. For most full-time workers, their employment status by itself excludes them and their family from the additional Obamacare subsidies delivered through BBB….”
About 156,199,800 Americans or 49 percent of the U.S. population receive health care through their employer, according to the Kaiser Family Foundation. Some employers will respond to BBB by dropping their healthcare coverage, “but from an employment-incentive perspective this only changes the form of the full-time employment tax to the Affordable Care Act’s (ACA’s) employer penalty for not offering coverage,” writes Mulligan. “The salary equivalent of that penalty is almost $4,000 per full-time employee per year.”
Unemployed Get Family Leave
Family medical leave is another benefit tied to not working, and could still be included in the Senate BBB bill. BBB is quite explicit on this; it states that eligibility requires a caregiving activity “in lieu of work, other than for monetary compensation,” writes Mulligan.
“Family medical leave is a cash benefit paid in proportion to the number of hours of such caregiving,” writes Mulligan.
“Presumably, the beneficiary could not both engage in a normal work schedule and claim such caregiving activities, but details would be subject to future executive-branch rulemaking,” Mulligan wrote. “If double-dipping were rampant, this would raise expenditure on the program, thereby requiring additional taxation which itself would discourage work.”
Risk of Hiring More People
BBB is replete with employer mandates with stiff penalties for noncompliance, says Mulligan.
Under one provision of BBB, failure to comply with federal occupational safety, health, and labor-standards trigger penalties that increase tenfold or more. “For example, the penalty for a large (100+) employer to employ an unvaccinated person is between $50,000 and $700,000 per violation and an additional $70,000 per day, all rescaled for the inflation adjustment prescribed in the statute,” writes Mulligan.
Such language could discourage any employer with just under 100 employees from expanding the workforce beyond the 100-person threshold.
Wildcard: Child Tax Credit
The biggest stumbling block to Senate passage of BBB could be the expanded child tax credit (CTC), press reports state.
The $1.9 trillion American Rescue Plan passed in March expanded the CTC from $2,000 per child to $3,000 per child and $3,600 for each child under 6. The new policy of paying the benefits monthly expired at the end of 2021. The White House and Senate Democratic leadership want a one-year extension of the increase, but Manchin insists the extension be for 10 years so its true cost is reflected in the Congressional Budget Office’s score of the bill.
A 10-year expanded CTC would cost around $1.5 trillion, but Manchin did not want the entire BBB to exceed $1.75 trillion, press reports state. That would leave only $250 billion for the bill’s numerous other social and climate programs.
‘Right to Work’
Mulligan quotes a younger Barack Obama, who once said “I am absolutely convinced … we have to have work as the centerpiece of any social policy.”
But BBB penalizes earning a living and subsidizes sloth, says John Goodman, president of the Goodman Institute for Public Policy Research and co-publisher of Health Care News.
“There is no more important right than the right to work,” said Goodman.
“Working provides income, protects families, discourages dependency, and builds self-esteem,” said Goodman. “By heaping huge penalties on employment and discouraging jobs and job creation, the BBB bill [is] an attack on that fundamental right.”
States ‘Dodge a Bullet’
BBB also threatened state fiscal stability, says Matt Dean, a senior fellow at The Heartland Institute, which co-publishes Health Care News, who served seven terms in the Minnesota legislature.
“BBB would have encouraged using one-time money for permanent and expanding state obligations for Medicaid. For states, the death of BBB means a bullet has been temporarily dodged because just as the short-term federal money of BBB would have run out in 2024 and 2025,” said Dean.
“The bill’s authors cleverly pushed cost inflators and expanded benefits on to states, beyond the time horizon of the bill to hide the true cost of the legislation.
Dean says the most nefarious portion of the bill saves money.
“In its attempt to continue to coerce and punish states that have not expanded Medicaid, BBB cuts payments to those who provide uncompensated care and provide health care services to the poorest Americans in Florida, Kansas, Tennessee, and Texas by eliminating state waivers and slashing Disproportionate Share Hospitals (DSH) allotments.”
Bonner R. Cohen, Ph.D., (bcohen@nationalcenter.org) is a senior fellow at the National Center for Public Policy Research.