Skip to Content
Close-up view of microphones and a desk.

Top surprises, hidden impacts, and tax implications of the proposed Build Back Better Act

September 23, 2021 / 23 min read

The current version of the Build Back Better Act offers a combination of surprises, quiet proposals with big impacts, expected developments, and implications for what might be coming next. Our National Tax Office experts discuss.

Editor's note: The developments discussed in this piece were part of the legislative process leading to enactment of the Inflation Reduction of 2022. Please see our capstone article about that legislation for details about the final changes included in that bill.

Potential tax law changes are beginning to take shape in Congress. The most recent development was the approval of the tax sections of the Build Back Better Act (BBBA) by the House Ways and Means Committee. That bill is now moving toward the House floor for debate, potential amendment, and a final vote before advancing to the Senate for consideration. The details of a final bill are yet to be determined and will depend on negotiations among Democratic members of Congress. However, the current House version of the BBBA does offer a combination of surprises, quiet proposals with big impacts, expected developments, and implications for what might be coming next. Those lessons are especially visible when the House bill is compared with the Biden administration proposals. Here are some of our initial takeaways.

Biggest surprises of the tax sections in the Build Back Better Act

The following proposals were not previously proposed by the Biden administration:

Quiet changes in the proposed Build Back Better Act with big impacts

Several other proposals are worth careful consideration because they are unlikely to generate much discussion in the short term but may have significant implications for many taxpayers.

Generally expected changes from the proposed Build Back Better Act tax sections

What does this tell us about what’s next?

Enacting broad legislation that includes new spending, social programs, and many types of tax changes is a complicated endeavor under any circumstances. Those challenges are magnified when attempting to pass legislation on a party-line basis with limited room for dissension. The 2020 election cycle provided the Democratic party with majorities in Congress, but there can only be three defections in the House and none in the Senate. This has always pointed toward a legislative process where individual members of the Democratic party would have the opportunity to shape the content and timing of legislation. That process is already evident when reviewing the BBBA from the Ways and Means Committee.

The House has followed many pillars from the Biden administration proposals, but also diverged from those proposals in several key respects. As a threshold matter, the BBBA does follow the core goal of Democratic leadership in increasing taxes on higher-income individuals and corporations. However, the House has chosen to limit the tax rate increases on corporations and capital gains, and instead modified the rules impacting the calculation of taxable income or total tax burden. Another trend includes the complete omission of some Biden administration proposals and the creation of several unexpected rule changes. Taken together, these proposals suggest general alignment between the House Democratic caucus and the White House with several crucial exceptions. Moving forward, it’ll be important to monitor any changes made on the House floor to the BBBA prior to a vote in that chamber.

Once the House completes its work, all attention will shift to the Senate. Democratic leadership in the House and Senate have coordinated to some degree during this process, so certain aspects of the BBBA might already be acceptable to Democratic senators. That said, it’s expected that there will be meaningful changes, including unexpected programs, when the legislative text is unveiled in the Senate. However, the modification of some of the more controversial proposals by the House does suggest that any future bill will have less impact on taxpayers than initially thought.

Continue to follow our Outlook on Tax Rates and Policy Changes for updates as the legislation works its way through Congress.

Related Thinking

Two professionals on building steps
September 17, 2021

Proposed Build Back Better Act contains key tax provisions

Article 18 min read
Government building room with marble archways and auditorium seating.
August 12, 2021

Senate passes infrastructure bill and initiates process for major tax changes

Article 5 min read
Close-up view of the American flag with skyscraper buildings in the background.
June 29, 2021

Biden administration's tax proposals: Understanding the impact

Article 15 min read