In rare moment of bipartisan harmony, the Senate Finance Committee announced late Tuesday night that it would soon mark up legislation to extend dozens of expired and expiring tax provisions through 2013 for items such as research and development and renewable energy.
At the same time, the deal also pares down the tax code: a move that sets a marker for end-of-the-year negotiations, as well as for overall tax-code reform. Some tax exemptions on the chopping block, according to staffers and lobbyists familiar with the ongoing negotiation, are breaks for expensing; traditional ethanol and refined coal; charitable donations for computer and book inventory; D.C. tax incentives; green-building bonds; and Midwest disaster bonds.
The Senate Finance Committee plans to mark up the plan on Thursday. Although the bill is not expected to go far before November, staffers and lobbyists say it’s an unexpected triumph for Senate Finance Committee Chairman Max Baucus, D-Mont., and ranking member Orrin Hatch, R-Utah, who are both eager to showcase that across-the-aisle alliances are still possible.
“It shows we can work together as a committee, which has 80 percent jurisdiction over the [fiscal] cliff and certainly 100 percent over the tax reform,” Baucus said. “This is a good precedent for cooperation, trusting each other, exchanging ideas.”
The package also sets comprehensive tax reform in motion. It establishes the Senate Finance Committee as a key player on the issue at a time when Ways and Means Chairman Dave Camp, R-Mich., says he wants a full review of tax extenders.
The committee’s deal could also reduce the burden on lawmakers during the expected lame-duck session, when Congress must decide the fate of roughly $400 billion worth of tax policy. At stake for just 2013 are the payroll-tax holiday and estate tax, not to mention extenders and other tax rates.
Handing out a list of tax exemptions the committee wants to ax months before any broad congressional action is plausible gives lobbyists plenty of time to storm the Hill to protect their particular break.
The Senate Finance Committee’s deal also could change lame-duck session negotiations in terms of leverage on the multitude of issues — not just relating to taxes — that must be addressed. “This is to address the cliff and this is to address tax reform,” Baucus said. “This is to do what we came here to do—represent our constituents and solve problems,” not be used for fodder in other battles.
Whether the rest of Congress has the stomach for following the committee’s lead is an open question.