The House Passes the $1.85 Trillion Build Back Better Act. Here’s What’s in It.

The House passed the $1.85 trillion Build Back Better Act with a narrow vote of 220 to 213 on November 19, after Minority Leader Kevin McCarthy (R-CA) delayed its passage with an 8 1/2 hour marathon speech. The Congressional Budget Office (CBO) announced one day earlier that the bill would add $367 billion to the deficit by 2031. Moderate Democrats initially delayed the House vote on the $1.2 trillion bipartisan infrastructure bill, which was signed into law by President Joe Biden on November 15, until a cost estimate could show that the Build Back Better Act would not increase the deficit. Both bills combined would invest roughly $3 trillion to overhaul the nation’s roads and bridges, electric and water systems, and high-speed internet; as well as fund education, climate and social programs. Let’s break down what the two bills could mean for you.

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How Biden’s $3 Trillion Plan Could Become Law

House Democrats pushed the $1.85 trillion Build Back Better Act forward with a majority of seven votes after McCarthy had delayed it with a speech that lasted over eight hours. Now, the bill will move to the Senate, where all Democrats must rally together to pass the legislation through an evenly divided chamber. This will require Vice President Kamala Harris to cast a tie-breaking vote if Democratic Senators are unable to get Republican support.

The Build Back Better Act is the second part of Biden’s infrastructure and social spending legislation, which combined with the $1.2 trillion Infrastructure Investment and Jobs Act will invest roughly $3 trillion on upgrading and expanding the nation’s physical infrastructure systems, and fund social programs focused on education, healthcare and the environment.

Biden signed the $1.2 trillion Infrastructure Investment and Jobs Act into law, 10 days after the House passed the bill with a 228 to 206 vote. Six progressive Democrats voted against the bill and 13 Republicans crossed party lines to support it.

Progressives initially refused to vote for the infrastructure bill, which was already approved by the Senate on August 10, until Congress agreed to move the $1.85 trillion Build Back Better Act forward.

Moderate Democrats had also pushed back, asking for a nonpartisan cost estimate score on the $1.85 trillion Build Back Better Act. Though they ultimately pledged to support the social spending legislation as long as it doesn’t add to the deficit.

The CBO said on November 18 that the $1.85 trillion Build Back Better Act would increase the deficit by $367 billion from 2022 to 2031. It noted, however, that the cost estimate does not include additional revenue that could be generated from tax enforcement.

In a separate report, the CBO also estimated on the same day that increased tax enforcement could bring in $207 billion in revenue. Deducting that amount from the $367 billion deficit would reduce the CBO’s projection to only $160 billion over the next 10 years.

In either case, both cost estimates are at odds with the president’s pledge to pay for his infrastructure and social spending legislation entirely with tax increases on ultra high net worth individuals and corporations.

“The Build Back Better Act is fiscally responsible. It reduces the deficit over the long-term. It’s fully paid for by making sure that the wealthiest Americans and biggest corporations begin to pay their fair share in federal taxes,” he said in a statement on November 19.

While some Republican Senators supported the $1.2 trillion bipartisan infrastructure bill, they are expected to oppose the broader Build Back Better Act. That means Democrats would need to pass legislation through the budget reconciliation process, allowing them to get it approved with a simple majority of one vote. Still, the bill faces a tough road ahead, with moderate Democrats focused on reducing deficit spending.

On December 6, Senate Majority Leader Chuck Schumer (D-NY) wrote in a letter to the Senate Democratic Caucus that “our goal in the Senate is to pass the legislation before Christmas and get it to the president’s desk.” Schumer also updated that eight out of 12 committees have already “submitted their final Senate text to the Parliamentarian, the Congressional Budget Office and the Senate Republicans.” And remaining committees aim to finalize “over the course of this week and next.”

The legislative process to pass the $1.85 trillion Build Back Better Act into law could take weeks or longer. A representative must first sponsor the bill and then get it assigned to a committee for review before the legislation can get voted on, debated or amended. Changes made to the legislation must also get approved in both chambers of Congress before it can get signed into law. Biden will have 10 days to sign or veto the bill after bicameral approval.

What’s in the $1.85 Trillion Build Back Better Bill?

The new text approved by the House for the Build Back Better Act notably guarantees paid family leave and medical leave for all national workers, which will provide “up to four weeks of paid leave for parental bonding or to deal with their own or a loved one’s serious medical condition.”

The bill also takes steps to:

• lower the cost of prescription drugs by allowing Medicare to negotiate lower drug prices
• reduce out-of-pocket co‑pays
• establish a $35 out-of pocket maximum for insulin
• create a new $2,000 out-of-pocket limit for seniors’ expenses in Medicare Part D

The Build Back Better Act was originally slated to include $3.5 trillion in spending, but as part of a compromise to reduce cost, it has been cut almost in half to $1.85 trillion. A scaled-back draft from October 28 excluded free community college, dental and vision benefits from Medicare, provisions to lower prescription drug prices and paid family leave. But the new House text re-introduced the last two benefits on November 5.

Biden said that while “no one got everything they wanted,” the scaled-back $1.85 trillion spending bill invests billions in health care, child care, housing and the climate.

The president specifically highlighted programs that:

• pay for senior home assistance
• cap child care expenses at a maximum of 7% of income for families making less than $300,000
• reduce more than one billion metric tons of greenhouse emissions (with a goal of cutting them by at least 50% in 2030)

Other provisions include:

• universal preschool for three- and four-year-olds
• a one-year extension of the expanded child tax credit
• expand utility and clean energy tax credits
• increase Pell Grants by $550
• expand Obamacare to additional states
• reduce health insurance costs for lower and middle class participants who get health coverage on Obamacare exchanges
• fund Medicare to pay for the cost of hearing aids

Additionally, the new House bill would raise the State and Local Tax (SALT) deduction “by increasing and applying the cap over the long-term” so that states and counties could get more revenue for essential public services. These include “emergency response services, public health services, and infrastructure development.”

The White House said on October 28 that the $1.85 trillion Build Back Better bill aims to help the United States meet climate goals, create new jobs and grow the economy “from the bottom up and the middle out.”

The table below breaks down 10 key programs from the new House bill:

$1.85 Trillion Build Back Better Bill

How Does It Compare With the $3.5 Trillion Agreement?

Democratic legislators had reached a $3.5 trillion Budget Committee agreement on July 13 to make the “biggest investment in the middle class in decades and act on the climate crisis.” The agreement, combined with the $1.2 trillion bipartisan plan, would have added up to $4.7 trillion.

Schumer said this will fund every major program that Biden asked for in his Build Back Better legislation proposals and make additions that expand Medicare, as well as healthcare funding for dental, vision and hearing.

“We are very proud of this plan. We know we have a long road to go. We’re going to get this done for the sake of making average Americans’ lives a whole lot better,” he told press.

The president met with the Senate Democratic Caucus on July 14 to support the Budget Committee agreement. The White House said that Biden described the Build Back Better agenda as a continuation of the American Rescue Plan, and emphasized that both economic policies are “built from the bottom up, with a recognition for the role that a good job plays in peoples’ lives.”

You should note that while the new bipartisan agreement aims to revitalize the American economy, it targets funds mostly for roads, water, electricity, broadband internet and other physical infrastructure projects.

Comparatively, the additional $3.5 trillion Budget Committee agreement focused more on human infrastructure programs that expand Medicare funding and coverage, support affordable childcare and free college education initiatives, and create pathways for employment, as well as transform the country’s energy system to address climate change needs.

Budget Committee Chairman Bernie Sanders (I-VT) told press that the new Democratic agreement would “create millions of good paying union jobs rebuilding this country not only from a physical infrastructure, but dealing with the human needs of our people which are many, and which have long been neglected.”

The table below breaks down key components from the $3.5 trillion infrastructure agreement. Budgets and programs are based on the FY 2022 Budget Resolution Agreement Framework presented by Senate Democrats on August 9:

$3.5 Trillion Infrastructure Agreement

What’s in the $1.2 Trillion Bipartisan Infrastructure Bill?

The $1.2 trillion infrastructure bill is limited largely to physical infrastructure, authorizing the federal government to spend new funds on roads and bridges, public transit, clean drinking water and waste water systems, high-speed internet and clean energy, among other projects.

The bill that passed on November 5 has been on the table since July 28, when the president joined a group of bipartisan Senators to announce that they had reached a deal “to make the most significant long-term investment in our infrastructure and competitiveness in nearly a century.”

The 2,702-page legislative text for a $1.2 trillion infrastructure bill was officially presented on August 1. This legislation combines previously approved funds with $550 billion in new spending that the Senate approved as part of the bipartisan deal on July 28.

Let’s break down in the table below key components from this new bipartisan infrastructure bill. Budgets and programs are based on the White House Fact Sheet that was presented on July 28:

$550 Billion Bipartisan Infrastructure Bill

How Will Biden Pay for the $3 Trillion Plan?

The White House said on June 24 that the $1.2 trillion Infrastructure Investment and Jobs Act would be financed by:

• closing the tax gap
• redirecting unspent emergency relief funds
• targeted corporate user fees
• new revenue from infrastructure investment

Comparatively, the House’s $1.85 trillion Build Back Better Act proposes a surcharge on high income individuals, estates and trusts for taxpayers with an adjusted gross income (AGI) over $10 million. This AGI limit is set at $5 million for married individuals filing separately and $200,000 for estates or trusts.

The legislation also imposes an additional 3% surcharge on taxpayers with AGIs over $25 million. A lower AGI limit is set at $12.5 million for married taxpayers filing separately and $500,000 for estates or trusts. The White House initially estimated on October 28 that a 2% AGI surcharge could raise $230 billion in revenue.

For a full breakdown of how much money the House Build Back Better Act could raise, the table below estimates revenue from high earner taxes, health care and other offsets. Data is based on November 18 projections from the Committee for a Responsible Federal Budget. (We broke out corporate tax revenue separately in the “How Would Biden’s Plan Raise Corporate Taxes” section below.)

House Build Back Better Act Offsets

The committee also projected that establishing an $80,000 SALT deduction cap from 2026 through 2030 and then a $10,000 cap in 2031 could bring in an additional $290 billion in revenue. However, it pointed out that this would likely result in lower revenue collection over time because Congress would have to approve additional expenses by extending the Tax Cuts and Jobs Act (TCJA).

Combined with $830 billion in projected revenue from corporate tax increases, the committee estimates that the House’s Build Back Better offsets could bring in a total of $2.27 trillion, which would raise the deficit by $160 billion.

In addition to these provisions, it’s also worth noting that Senate Finance Committee Chair Ron Wyden (D-OR) had presented on October 27 an updated version of the Billionaires Income Tax with the aim of ensuring that “billionaires pay tax every year, just like working Americans.” The new House bill, however, excludes this tax.

Currently, wealthy Americans pay short-term and long-term capital gains taxes depending on when they sell their assets. But Wyden’s proposal would have mandated annual taxes on the increased value of assets, no matter how long they are held. It was estimated that the tax would have targeted roughly 700 of the wealthiest American taxpayers with more than $1 billion in assets or more than $100 million in income over three consecutive years. Pelosi anticipated this could have brought up to $250 billion in additional revenue.

Biden has pledged that the $3 trillion infrastructure and spending legislation will not “raise taxes on anyone making less than $400,000 a year.”

How Would Biden’s Plan Raise Corporate Taxes

The Committee for a Responsible Federal Budget said on November 18 that Biden’s Build Back Better legislation would raise $830 billion in corporate tax increases.

These include:

• 15% corporate minimum tax on large corporations earning more than $1 billion in profits (raising $320 billion)
• 15% global minimum tax and reform international taxation (raising $280 billion)
• levy a 1% surcharge on stock buybacks, which is the amount that companies spend to repurchase shares (raising $125 billion)
• enact other corporate tax reforms (raising $105 billion)

For additional context, it’s worth noting that Biden had already announced during his presentation of the American Jobs Plan in March that half of the infrastructure and jobs package could be paid for by raising corporate taxes from 21% to 28%, which would have generated $1 trillion in additional revenue.

“We’re going to raise the corporate tax,” he said on March 31. It was 35%, which is too high. We all agreed, five years ago, it should go down to 28%, but they reduced it to 21%. We’re going to raise it back to—up to 28%. No one should be able to complain about that. It’s still lower than what that rate was between World War Two and 2017. Just doing that one thing will generate $1 trillion in additional revenue over 15 years.”

The House Ways and Means Committee later proposed a lower graduated corporate tax increase up to 26.5% in September (see the House Ways and Means Committee Corporate Tax Proposals table below). This tax change aimed to roll back President Donald Trump’s 2017 Tax Cuts and Jobs Act, which set the current 21% flat tax rate for all businesses. Trump’s tax reduction was a big change from previous tax years, ending marginal rates across eight income tax brackets listed in the table below:

2017 Corporate Tax Rates

You should keep in mind that even when the corporate tax rate was as high as 35%, a 2013 report from the Government Accountability Office (GAO) initially estimated that U.S. corporations paid an average effective tax rate of 12.6%. This was later revised to 22.9%, but tax experts generally agree that most businesses do not pay the full corporate tax rate after claiming deductions and credits.

In an effort to rally support for the corporate tax hike, the president said during his March speech that almost one-fifth of Fortune 500 companies, including Amazon, took advantage of tax loopholes to avoid paying federal income taxes.

“In 2019, an independent analysis found that…91 Fortune 500 companies—the biggest companies in the world, including Amazon—they used various loopholes so they’d pay not a single solitary penny in federal income tax,” he said. “I don’t want to punish them, but that’s just wrong. That’s just wrong. A fireman and a teacher paying 22%? Amazon and 90 other major corporations are paying zero in federal taxes?”

Biden had also said that he would raise additional revenue to pay for the American Jobs Plan by establishing a global minimum tax rate of 21% to eliminate loopholes and foreign tax credits that large multinational companies could claim to avoid paying federal taxes.

“We’re establishing a global minimum tax for U.S. corporations of 21%,” the president said. “We’re going to level the international playing field. That alone will raise $1 trillion over 15 years. We’ll also eliminate deductions by corporations for offshoring jobs and shifting assets overseas.”

On April 5, Treasury Secretary Janet Yellen rallied behind Biden’s plan, calling for a global minimum corporate tax rate.

“Together we can use a global minimum tax to make sure the global economy thrives based on a more level playing field in the taxation of multinational corporations, and spurs innovation, growth, and prosperity.”

The table below breaks down seven specific corporate tax changes based on the proposals that the House Ways and Means Committee presented on September 13:

House Ways and Means Committee Corporate Tax Proposals

For a comparison, the table below breaks down eight initial corporate tax changes that the White House fact sheet presented on March 31:

Biden Tax Plan for Corporations

Will Biden’s Infrastructure Plan Raise the Deficit?

The Congressional Budget Office (CBO) said on November 18 that the $1.85 trillion Build Back Better Act would increase the deficit by $367 billion in 10 years. It noted, however, that this estimate does not count “any additional revenue that may be generated by additional funding for tax enforcement.”

It’s also worth noting that the Committee for a Responsible Federal Budget narrows that deficit. Based on the CBO’s score, it concludes that the House’s Build Back Better Act will cost more than $2.4 trillion in spending increases and tax cuts through 2031 but bring in almost $2.3 trillion in offsets. Though the committee qualifies its estimate by saying that “the numbers can vary depending on how certain provisions are classified.”

On November 30, the committee also said that if all Build Back Better Act extensions were enacted without offsets, the legislation would increase the deficit from $160 billion to $2.8 trillion.

For reference, the CBO had already projected on August 5 that the $1.2 trillion Infrastructure Investment and Jobs Act alone would increase the U.S. deficit by $256 billion from 2021 to 2031. This means that roughly half of the $550 billion in new spending for highways, transit programs, and other projects will be paid for by adding to the national debt.

Data from the University of Pennsylvania’s Penn Wharton Budget Model elevated that deficit from the bipartisan infrastructure bill to $351 billion. However, the analysis also concluded that the “proposal would have no significant effect on GDP by end of the budget window (2031) or in the long run (2050).”

The CBO projected on August 5 that the federal budget deficit will reach $3 trillion in fiscal year 2021 and average $1.2 trillion per year from 2022 to 2031. You should note that this estimate is based on the assumption that the current tax and spending laws remain the same.

How Does Biden’s Original $2.3 Trillion Plan Compare?

Biden’s original infrastructure proposal called for an infrastructure and jobs plan that would have spent more than $2 trillion, or 1% of the U.S. GDP annually. His American Jobs Plan, which was presented in March, similarly focused on clean-energy, electric automobiles, nationwide broadband access and workplace development programs, among other investments.

For a comparison with the bipartisan deal, more than half of the president’s first infrastructure plan targeted transportation, elderly and disabled care, and manufacturing—adding up to $1.321 trillion. The plan also called specifically to fund $213 billion for housing and $180 billion for tech research and development, as well as investing $311 billion in water, clean-energy and internet systems; $100 billion to upgrade and build schools and child care centers, and $100 billion in workforce training over the next eight years.

The table below breaks down key components from Biden’s original infrastructure and jobs plan. Programs and budgets are based on the White House Fact Sheet that was presented on March 31:

Biden’s $2.3 Trillion American Jobs Plan

Keep in mind that Republicans had also presented an alternative infrastructure plan worth approximately one-quarter of Biden’s original plan ($568 billion) on April 22. The Republican counterproposal limited spending to rebuilding roads and bridges, airports and ports, public transit systems, water, broadband and other networks.

So What Could the Infrastructure Plan Mean for You?

Politicians on both sides of the aisle have looked towards infrastructure as a way to lay the foundation for a unified country. But Biden said last March that the American Jobs Plan aims to do more than just fix potholes and reduce gridlock traffic. His plan aims to rebuild the middle class so that a greater number of people could prosper.

“You know, this is not to target those who’ve made it; not to seek retribution. This is about opening opportunities for everybody else,” he said in April. “And it’s time—in this time, we’ll rebuild the middle class. We’re going to bring everybody along. Regardless of your background, your color, your religion, (inaudible) everybody gets to come along.”

The American Society of Civil Engineers also points out that without necessary investments in infrastructure, families will lose more than $3,300 in disposable income every year between 2020 and 2039 – that’s roughly $9 per day or $66,000 in 20 years – due to deficiencies.

SmartAsset’s 2021 study also shows that infrastructure needs are uneven across the country. Electric outages in Arizona, for example, could last only about 53 minutes on average. While an outage in West Virginia could last more than seven times longer than Arizona. For more information, read SmartAsset’s state rankings for the best infrastructure in 2021 and 2019.

SmartAsset broke down how much each state will get from Biden’s $1.2 trillion Infrastructure Investment and Jobs Act in a state-by-state table here.

Let’s take a look at four ways the new bipartisan infrastructure plan will impact you the most:

You will save time on your commute. The U.S. Census Bureau says that the average commute for 148 million workers in 2019 took 27.6 minutes to get to work each way. This is an all-time record high since the bureau started collecting travel data in 2006. The White House also points out that households taking public transportation to work “have twice the commute time.” The bipartisan plan calls on Congress to invest $105 billion in public transit and passenger and freight rail, as well as an additional $7.5 billion that will also in part fund electric buses. These upgrades aim to ultimately reduce traffic congestion for everyone.

The government will build chargers for your electric car. Biden initially wanted to provide tax incentives and point-of-sale rebates to help “all American families afford clean vehicles of the future.” He has already proposed $174 billion for electric vehicles and charging stations, which includes $100 billion in consumer rebates. But the White House says the bipartisan plan calls on Congress to invest only $7.5 billion to “build a national network of electric vehicle (EV) chargers along highways and in rural and disadvantaged communities.” The president set an initial goal of building 500,000 EV chargers by 2030.

You will have faster and cheaper internet. Biden wants to connect “high-speed, affordable, reliable Internet wherever you live.” The White House says that more than 35% of rural America lacks access to reliable high-speed internet. And the new bipartisan deal allocates $65 billion to bridge the internet gap between rural and urban Americas with the construction of high-speed broadband infrastructure that can reach 100% coverage nationwide.

More pathways to good-paying jobs. Biden wants clean energy and infrastructure investments from the federal government to support prevailing wages and labor jobs. The White House says that the bipartisan infrastructure plan can “create good-paying union jobs and advance environmental justice.”

Bottom Line 

The House passed the $1.85 trillion Build Back Better Act with a narrow vote of 220 to 213 on November 19, just five days after Biden had signed the $1.2 trillion bipartisan infrastructure bill into law. Combined, both bills will invest roughly $3 trillion in roads, water, electricity, broadband internet and other physical infrastructure projects, as well as expand legislation to fund health, education and climate programs.

The White House says the legislation will create good-paying union jobs and economic growth for a generation of Americans, and position the United States as a 21st century leader in technology and the environment.

“This deal signals to the world that our democracy can function, deliver, and do big things,” Biden said on July 28. “As we did with the transcontinental railroad and the interstate highway, we will once again transform America and propel us into the future.”

The $1.85 trillion Build Back Better Act will now move to the Senate, where it still needs to get approved before Biden could sign it into law.

SmartAsset will continue to update this article as soon as more information becomes available.

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