Senate Finance Chairman Max Baucus said Monday he would introduce a sweeping tax bill today to extend expiring provisions and prevent the alternative minimum tax from hitting 21 million more taxpayers next year. The measure would be called up as early as today as a substitute amendment to the House-passed tax extender bill, which was approved by that chamber last month without the AMT patch.
It might also add unrelated policies to attract GOP votes. That might include an extension of payments to rural counties historically dependent on timber sales for revenue, important in Western states such as Oregon, home to Republican Sen. Gordon Smith.
The AMT portion would not be offset, but other provisions would be.
Smith was among 41 GOP senators who signed a letter in April opposing offsets for extensions of expiring tax policies, but he also is up for re-election this year. A Smith spokeswoman was unavailable at presstime.
GOP aides have taken to calling Baucus' substitute "the shopping cart," referring to Democrats' quest for votes.
Even if Smith were to support it, GOP leaders have as many as 46 committed 'no' votes, according to sources, meaning the bill could still be in limbo after today.
For the White House and most Republicans, they do not believe in offsetting extensions of existing tax law, arguing that spending programs continue in the budget baseline even after they expire and do not require offsets.
"We've seen this movie before: Democrats want to raise taxes on some to extend current tax law for others. Here's how the movie ends: It won't happen," a senior Senate GOP aide said. "In the end, tax relief will be extended and without raising taxes."
The underlying bill would extend expiring tax breaks important to businesses, such as the research and development credit, multinationals' active financing exemption for taxes deferred on income earned abroad and renewable energy incentives. Popular tax breaks for individuals are included as well, such as extensions of deductions for state and local sales taxes and college tuition.
Like a similar House bill, it would be paid for through closing a loophole allowing hedge fund and other investment managers to defer taxes on their compensation in offshore accounts. It would delay for 10 years a tax break on companies' worldwide interest expenses set to go into effect next year.
Despite initial hesitation over the offsets, a huge coalition of business interests has decided they are better off with their tax breaks extended. "These companies realize that in order to get extenders done now, they, along with Congress, must pay for these provisions," Baucus said on the floor.
Baucus added the revenue-raisers represent "sound tax policy" and the Senate is faced with a choice between incentives for creating jobs and medications and defending tax breaks for hedge fund managers. "I believe the choice is easy," he said, adding that his decision to include an AMT patch without offsets was a nod to Republicans.
Hundreds of companies signed onto a letter to all 100 senators Monday urging support for the bill and final passage before the July Fourth recess.
"Failure by Congress to move quickly to extend these important provisions will bring investment in renewable energy and energy efficient projects to a standstill, make it more difficult for U.S. companies to invest in critical R&D projects in this country, reduce private sector investment in business and economic development projects in distressed areas, and force many U.S.-based financial institutions to suffer a massive tax increase at a time when they can least afford it," the letter states.
Still, sources said the animosity over judicial nominations and the majority's unwillingness to allow GOP amendments is likely to stymie action on the bill.
They noted Finance ranking member Charles Grassley has signed onto the GOP substitute, which would extend the expiring provisions as well as the AMT without offsets, whereas Grassley usually works together with Baucus on tax bills. Few expect Majority Leader Reid to allow a vote on the GOP substitute.
"The Senate has had a tradition of amendments for hundreds of years, and if you skip the Finance Committee and go straight to the floor, also without amendments, it's difficult to see anything getting done," said one industry source. "All of a sudden you bring up a tax bill, it's open season in terms of pent-up demand. Tomorrow we're back on climate change, and nobody's legislating."
This article appears in the June 14, 2008 edition of NJ Daily.