Legislation to revive or extend tax breaks that expired last year or at the end of this year could come to the Senate floor before the Fourth of July recess, perhaps as soon as debate on climate change legislation comes to a close. But the bill still faces fights over the alternative minimum tax and on the question of offsetting extensions of tax cuts that are already in law -- disputes that could push final action until later this year. "That's a big problem," said Senate Budget Chairman Kent Conrad, a senior Finance Committee member. Conrad made his remarks today after Senate Finance Chairman Max Baucus held a closed bipartisan briefing for panel members and staff, with the tax legislation a major topic of discussion.
Senate Democrats are expected in the next few weeks to make a motion to proceed to House version of the tax bill, which it approved before Memorial Day, and take up a substitute amendment to add some modifications. The measure would extend and expand various renewable energy incentives as well as a host of other tax breaks for individuals and businesses. But it does not contain a fix preventing the AMT from hitting 21 million more taxpayers next year. Senate Finance ranking member Charles Grassley said Republicans are pressing to add the AMT fix. "I think it has to be in there," he said after the meeting. He also stressed that enough Republicans remain united against providing offsets for the other tax extenders in the House bill to maintain a filibuster. The House's $55 billion package meets pay/go requirements by immediately taxing compensation earned by investment managers in offshore accounts, which they currently can defer taxes on. It would also delay by 10 years a tax break for multinational firms set to take effect in January.
Grassley said more than 41 Republicans believe current-law tax policies should not be offset, as continuing entitlement spending programs do not require offsets. But some business groups, actively lobbying to continue tax breaks such as the active financing exemption for income earned overseas, are pressing Senate Republicans to relent. Baucus has said he may add an AMT patch without offsets, which could provide a sweetener for wavering Republicans.
Conrad knows the votes are not there to pass a fully offset AMT patch, but said he continues to advocate for it. "As I said in there, the president's budget does not balance without the revenue from the AMT; none of the budgets balance," he said. "Every time we bring it up, [Republicans] say, 'OK, let's borrow some more money from the Chinese and the Japanese.' That's a brilliant plan." Conrad said one area of bipartisan agreement on taxes was to extend the expiring provisions for more than just one or two years, although he acknowledged that was not feasible this year. "We were talking about a change to our system that would permit long-term extensions, minimum five years, because what we're doing now makes no economic sense," he said. "There was a real sort of bipartisan eruption at the end here that this just doesn't make sense to keep on doing it this way year after year. It's just a mistake and we can do better."
This article appears in the June 7, 2008 edition of National Journal Daily PM Update.