What's in the House's Build Back Better Act?
We have published an full estimate of the House's Build Back Better Act based on CBO's scores of the bill here.
The House is poised to vote this month on an updated version of the Build Back Better reconciliation legislation. Based on preliminary figures from the White House, the Joint Committee on Taxation (JCT), and the Congressional Budget Office (CBO), we estimate the latest version of the bill includes roughly $2.4 trillion of spending increases and tax cuts through 2031 along with $2.2 trillion of offsets. The result is a roughly $200 billion deficit increase over ten years. The actual deficit increase could be smaller to the extent that immigration reform is less costly, and some appropriated funds are spent beyond 2031. However, extending temporary provisions in the bill could add $2 trillion to $2.5 trillion to the total cost.
What's in the Build Back Better Act?
|Family Benefits||$585 billion|
|Provide universal pre-k & establish an affordable child care program (6 years)||$390 billion|
|Establish a paid family and medical leave program||$195 billion|
|Climate & Infrastructure||$555 billion|
|Invest in clean energy & climate resilience||$220 billion|
|Establish or expand clean energy & electric tax credits||$190 billion|
|Establish or expand clean fuel & vehicle tax credits||$60 billion|
|Establish or expand other climate-related tax benefits||$75 billion|
|Enact infrastructure & related tax breaks||$10 billion|
|Individual Tax Credits & Cuts||$210 billion|
|Extend Child Tax Credit (CTC) increase to $3,000 ($3,600 for kids under 6) for one year||$130 billion|
|Make CTC fully refundable for 2023 & beyond||$55 billion|
|Extend expanded Earned Income Tax Credit (EITC) for one year||$15 billion|
|Other individual tax changes||$10 billon|
|Health Care||$335 billion|
|Strengthen Medicaid home- and community-based services||$150 billion|
|Extend expanded Affordable Care Act (ACA) premium tax credits & make premium tax credits available to those in Medicaid coverage gap through 2025||$125 billion|
|Establish Medicare hearing benefit||$30 billion|
|Invest in the health care workforce||$30 billion|
|Other Spending & Tax Cuts||$310 billion|
|Build & support affordable housing||$170 billion|
|Increase higher education & workforce spending||$40 billion|
|Other spending & investments||$100 billion|
|Reduce or Delay TCJA Base Broadening||$290 billion|
|Increase SALT deduction cap to $80,000 through 2025||$285 billion+|
|Delay amortization of research & experimentation expenses until 2026||$5 billion'|
|Enact Immigration Reform||~$100 billion|
|Subtotal, Build Back Better Act Spending & Tax Breaks||$2.4 trillion|
|Increase Corporate Taxes||-$830 billion|
|Impose a 15 percent domestic minimum tax on large corporations||-$320 billion|
|Impose a 15 percent global minimum tax & reform international taxation||-$280 billion|
|Impose a 1 percent surcharge on corporate stock buybacks||-$125 billion|
|Enact other corporate tax reforms||-$105 billion|
|Increase Individual Taxes on High Earners||-$640 billion|
|Expand the 3.8 percent Net Investment Income Tax||-$250 billion|
|Impose a 5 percent surtax on income above $10 million & an 8 percent surtax on income above $25 million||-$230 billion|
|Extend and expand limits on deductibility of business losses||-$160 billion|
|Other Revenue||-$170 billion|
|Reduce the tax gap by funding IRS & other measures||-$125 billion*|
|Reinstate superfund taxes on oil||-$25 billion|
|Expand nicotine taxes||-$10 billion|
|Reform tax treatment of retirement accounts||-$10 billion|
|Health Care||-$250 billion|
|Repeal Trump Administration drug rebate rule||-$150 billion|
|Reform Part D formula, cap drug price growth, & allow targeted drug price negotiations||-$100 billion|
|Establish $80,000 SALT deduction cap from 2026 through 2030 & $10,000 cap in 2031||-$300 billion+|
|Subtotal, Build Back Better Act Offsets||-$2.2 trillion|
|Net Deficit Increase, House Build Back Better Act||~$200 billion|
|Memo: White House estimate of net deficit change (negative number indicates deficit reduction)||-$36 billion|
|Memo: Net deficit increase if temporary provisions are made permanent without offsets||$2.2 to $2.7 trillion|
Sources: The White House, Joint Committee on Taxation, and Committee for a Responsible Federal Budget.
+The House fully pays for an increase in the SALT deduction cap through 2026 on paper by extending the cap beyond 2026 after most provisions of the TCJA have expired. While this change raises revenue relative to current law, it would substantially increase the cost of extending the TCJA and thus is likely to result in lower revenue collections over time. We nonetheless count the new revenue as an offset in our official tally.
'Represents the net cost of temporarily delaying the switch to amortization of research and experimentation expenses — the policy costs $126 billion through 2025.
*Though the White House estimates this provision would raise $400 billion, a recent CBO estimate found the President's proposal to boost IRS funding by $80 billion would produce only $120 billion of net revenue; as a result of several differences in the House bill, we estimate this provision – along with a change in how IRS penalties can be assessed – would generate $125 billion of net revenue.
Among the new spending and tax breaks, the Build Back Better Act spends roughly $585 billion to provide universal pre-K, establish an affordable child care program, and create a paid family and medical leave program. Another $555 billion goes toward climate change mitigation, $335 billion to expand health care benefits, and $200 billion to (mostly temporarily) expand the Child Tax Credit (CTC) and the Earned Income Tax Credit (EITC). It also spends more than $300 billion on housing and other initiatives, and almost as much to delay or weaken revenue raising provisions from the Tax Cuts and Jobs Act (TCJA) of 2017 – mainly the cap on the State and Local Tax (SALT) deduction. Finally, the bill allocates up to $100 billion for immigration reforms, though the actual cost is unknown, and the structure may change in the Senate.
Most of these policies were part of the previous Build Back Better framework, however the latest version adds nearly $200 billion for a paid family and medical leave program and nearly $300 billion to increase the SALT deduction cap from $10,000 to $80,000 for tax years 2021 through 2025.
The Build Back Better Act offsets these costs with tax increases on high-income earners and corporations, increased Internal Revenue Service (IRS) funding, prescription drug pricing reforms, and other revenue increases. Specifically, it would raise $320 billion from a 15 minimum tax on large corporations based on income reported to shareholders, $125 billion from a 1 percent surtax on stock buybacks, $280 billion from international tax reforms that include a global 15 percent minimum tax on foreign corporate earnings, and over $100 billion from other corporate tax changes. $230 billion of additional revenue would come from a 5 percent surtax on income above $10 million and an 8 percent surtax on income above $25 million, $250 billion from closing loopholes for pass-through income and Medicare taxes, and $160 billion from extending limits on business losses for high-income earners after 2026. A variety of other tax provisions would raise a combined $45 billion, while prescription drug reforms would raise roughly $250 billion based on preliminary White House estimates.
Based on recent CBO estimates, we believe the legislation will generate roughly $125 billion on net from improving tax compliance – mainly by increasing IRS funding by $80 billion over ten years. Importantly, the White House believes this provision will raise $400 billion. Finally, we estimate extending the $80,000 SALT deduction cap beyond the current cap expirations in 2026, and reducing it to $10,000 in 2031, would technically raise around $300 billion. In reality, we view this revenue as highly questionable and more of a gimmick.1
Based on these estimates, the cost of the Build Back Better Act will exceed offsets by roughly $200 billion over ten years. The actual deficit impact is likely to be somewhat lower to the extent that ours and the White House’s estimates (which we incorporate) overstate the cost of immigration changes and count the cost of budget authority in the ten year window that will not be spent until 2032 or later.
On the other hand, the legislation relies too heavily on arbitrary expirations to keep reported costs down. Making all provisions permanent would cost $2 trillion to $2.5 trillion over a decade. Whether these contribute to the debt depends on the existence or absence of future offsets.
Read more options and analyses on our Reconciliation Resources page.
1 Our overall estimates generally match those of the White House, except our tax gap of estimate of $125 billion rather than the Administration’s claimed $400 billion and our decision to count the SALT deduction cap changes as two different policies: an increase before 2026, and an imposition in 2026 and beyond.