Senator Tom Coburn, an Oklahoma Republican, said he will block a panel vote on an agreement to revive lapsed tax breaks, including a credit for corporate research and a benefit for financial-services companies’ overseas operations.
The Senate Finance Committee early today had scheduled a vote for tomorrow on the $152 billion plan, which would continue most of the breaks through 2013. Coburn, saying he wanted more time to review the measure, said he would invoke a rule requiring 48 hours notice of a committee vote.
The bipartisan proposal doesn’t include several lapsed or expiring breaks, including the production tax credit for wind, accelerated depreciation for motorsports tracks, tax breaks for investment in the District of Columbia and a tax credit for ethanol.
Senators may add some of those provisions into the bill tomorrow if the committee meeting takes place as scheduled. Committee Chairman Max Baucus said he probably will modify the proposal before the vote, while declining to say how. He said after Coburn’s comments that he is trying to reach a consensus.
“It feels good,” Baucus, a Montana Democrat, told reporters today about the measure. “We reached agreement. That’s the main thing.”
The agreement marks a rare moment of bipartisan cooperation on tax policy, which sharply divides Republicans and Democrats. The parties are locked in a stalemate over whether to extend income-tax cuts for top earners beyond 2012.
The Senate voted 51-48, mostly along party lines, on July 25 for the Democratic plan to let some of those income-tax cuts lapse. The Republican-led House will vote today to extend income tax cuts for all levels. The tax breaks, said Baucus and Senator Orrin Hatch, the top Republican on the Finance Committee, provide an opportunity for compromise.
The list of breaks, many of which have their own lobbying coalitions, include an optional deduction for state sales taxes, accelerated depreciation for certain restaurants and the ability for financial-services companies to defer U.S. taxation on overseas income. Many expired at the end of 2011 and some are slated to lapse at the end of this year.
Companies that benefit from tax breaks in the package include Whirlpool Corp., General Electric Co. and Citigroup Inc.
Alternative Minimum Tax
The bill would ensure that more taxpayers aren’t subject to paying the alternative minimum tax for the 2012 tax year. The levy was designed as a mechanism to prevent top earners from legally avoiding all taxes. Unless Congress acts, this year it will affect 31.2 million households, up from 4.3 million in 2011, according to the Tax Policy Center, a nonpartisan research group in Washington.
The AMT change makes up most of the $152 billion cost of the proposal.
Senator John Thune, a South Dakota Republican and wind-energy advocate, said he expects a one-year extension of the wind credit will be added to the bill, which he described as a work in progress.
“I hope we can get something done and keep it confined to as narrow a list as possible,” Thune said today. “We’ll see. It’s kind of evolving, it seems like, by the hour in terms of what the deal is, and we’re still trying to get the particulars of it.”
Baucus will push to include the wind credit in the measure, said Sean Neary, a spokesman for the chairman.
Baucus said senators are discussing whether to pursue a one-year extension or a longer-term phased reduction in the credit.
Turning the committee’s agreement into law will take time. Congress will leave Washington at the end of the week for a recess scheduled to last until Sept. 10.
The House of Representatives won’t consider the miscellaneous tax breaks until after the Nov. 6 election, said Representative Patrick Tiberi, an Ohio Republican on the tax-writing Ways and Means Committee.
In terms of dollars, the debate over the so-called tax extenders package is less significant than the broader dispute over whether to extend the George W. Bush-era income tax cuts, which expire at the end of 2012.
Hatch of Utah said he hoped that an agreement on the miscellaneous breaks would build momentum toward a broader rewrite of the tax code.
“This is a first step toward the ultimate goal of comprehensive tax reform that shows that there is a path to resolving the challenges we face as a nation,” he said in a statement.
Democrats had been trying to expand the package beyond what Republicans call the “traditional” extenders list. They wanted to revive a program from the 2009 stimulus law that allows companies to turn renewable-energy tax credits into cash grants. They also wanted to extend a college tuition tax credit set to expire at the end of 2012.
“It’s all conditioned on how tightly focused the effort is,” Senator Richard Burr, a North Carolina Republican, said July 30.
Republicans were able to prevent those provisions from being included in the bill. Republicans conceded on allowing the language on the alternative minimum tax, which they and Democrats had previously tied to the expiring income tax cuts.
“I believe strongly in the tuition credit, but AMT’s an even bigger deal,” Senator Charles Schumer, a New York Democrat, said before the agreement was announced.
Because the alternative minimum tax disallows the deduction for state and local taxes, it has a disproportionate effect in high-income states with heavier tax burdens, including California, New York, New Jersey and Connecticut.