The stakes remain high as businesses seek to manage potential changes to US and global tax policy while responding to a world of technological disruption, fractured geopolitics, the enduring impacts of the COVID-19 pandemic and increased focus on ESG concerns.
President Biden took office in 2021 with the promise to deliver a shift in policy from the previous administration in a number of areas, but the outlook for US tax policy remains uncertain as the 117th Congress begins its second session. This is due in large part to the fact that a narrow House Democratic majority and an evenly divided Senate have limited the ability of President Biden and Democratic Congressional leaders to advance many of the corporate, international and individual tax proposals that the president announced in early 2021.
With the potential for Senate Democrats to have the final say in shaping the tax provisions of the Build Back Better bill, what should business stakeholders be doing now?
You’re invited to join a webcast with a group of our Tax Policy Outlook authors for exclusive content and analysis of policy changes and the key role that tax can play while managing constant change. Don’t miss your opportunity to ask policy questions and dive deeper into the report.
With the second session of the 117th Congress underway, Democrats continue to hold a slim majority in the House of Representatives. The House presently is composed of 222 Democrats and 212 Republicans, with one open seat that had been held by a Republican. Assuming all current House members are present and vote along party lines, Democrats can afford to lose only four votes to pass legislation with a simple majority of 218.
Concerns over the outlook for US and global economic growth have remained high as countries have sought to deal with the effect of the pandemic, supply chain disruptions, and other political and social sources of disruption. These concerns and political disagreements over the direction of US economic policy are expected to influence both legislative activity in the current Congress and the outcome of the 2022 midterm elections.
The top 2022 tax policy priority for President Biden and most Democrats in Congress is the ongoing effort to enact some version of the House-passed Build Back Better legislation. The need to secure the support of all 50 Democratic Senators—and the support in particular of Senators Manchin and Sinema—remains the primary obstacle to enacting significant corporate, international and individual tax changes this year. The prospect of losing Democratic control of one or both chambers means President Biden and Congressional Democrats face additional pressure to act on their agenda during the current Congress.
While policymaking in Washington continues to command C-suite attention, sweeping global tax changes will come into greater focus in 2022. In the wake of last year’s historic political agreement on the Organisation for Economic Cooperation and Development’s (OECD) digital tax project, countries will grapple with the task of finalizing and implementing the newly agreed-upon rules, which are scheduled to take effect from 2023.
The uncertainty that has impacted global trading and geopolitical systems for the past several years continues to be as fluid as at any time in recent memory. Global events such as COVID-19 also have exposed existing challenges across supply chains and have been a catalyst for businesses to adapt to dramatic shifts in supply and demand. Stretched supply chains—driven by shortages of intermediary inputs, warehousing and labor—combined with historic demand for goods have led to shortages around the world.
States saw a dramatic improvement in their fiscal outlooks as they progressed through the 2021 legislative sessions, enacting the largest spending increases since fiscal year 2007. When they closed the books on fiscal year 2021, 46 states reported year-end balances at least 10% above their total general fund spending.
Businesses face several hurdles in 2022: Inflation has reached a 40-year high, suitable talent is as tough as ever to find and supply chain complications continue to cause disruption. Yet business leaders continue to pursue growth against these headwinds. To that end, they’re prioritizing investments in hiring and retaining talent and digital transformation initiatives.
Our latest Pulse survey underscores the importance of taking a unified approach across the C-suite to achieve common goals with a shared set of priorities. Read our report to see how leaders are doing to tackle today’s business issues.