House Democratic leaders today made formal their demands that Republicans accept offsets for a package of popular tax cut extensions or risk blame for their defeat, outlining the ultimatum in a letter to Senate Majority Leader Reid and Minority Leader McConnell. "We will not vote to waive the PAY/GO rule for business tax extenders legislation that would increase the deficit," wrote Speaker Pelosi, House Majority Leader Hoyer, Ways and Means Chairman Charles Rangel and others. "Continued opposition to the reasonable offsets for this legislation will result in millions of American families and businesses being denied tax relief." The letter comes after Senate GOP leaders blocked consideration of the House-passed tax bill earlier this week, which would extend a number of renewable energy incentives, research and development credits for companies and the state sales tax deduction for individuals, among many others.
Republicans continue to oppose offsets for the expiring provisions. "Once again, Democrats' bizarre insistence that we raise taxes to prevent a tax hike will delay extending these important tax incentives," said a spokesman for House Minority Leader Boehner. Senate Finance Chairman Max Baucus has included a number of provisions aimed at attracting Republican votes for the Senate version, including a one-year patch shielding 22 million more taxpayers from the alternative minimum tax without offsets, but revisions will likely be needed. Reid said talks were continuing, but he hoped to have a resolution "in the next 24 hours or so." Baucus today said he was working on some refinements, but the extender bill was too important to let die. "There's a lot of pressure on the other side to pass extenders, including energy," Baucus said.
Senate Finance ranking member Charles Grassley predicted Democrats would ultimately cave because of the addition of the AMT patch, which is tied to the extender package in the Senate. A Republican leadership aide noted Democrats have already given up on offsetting the AMT, which disproportionately impacts Democratic strongholds like New York and California, while insisting on offsetting the state and local sales tax deduction, important in states like Florida and Texas. "It appears the Democrat pay/go criteria is that if it is a tax extender to help a lot of blue states, such as AMT, there is no need to comply, but if it is an extender that helps red states or American employers, like state sales tax deductibility or R&D tax credit, then waiving pay/go is not an option," the aide said.
At a news conference today, Democratic leaders said it was time to stop adding to the deficit, which is largely borrowed from countries like China. "How long are the Republicans going to depend on the People's Republic of China to bail out this great nation?" Rangel asked. Ways and Means Select Revenue Measures Subcommittee Chairman Richard Neal, D-Mass., said the offsets in the bill, targeting hedge fund managers and delaying another tax break yet to take effect, "were the least offensive we could find. Not one phone call in opposition to these offsets." Hoyer said he would not bring the extender bill to the floor unless it is offset.
This article appears in the June 14, 2008, edition of National Journal Daily PM Update.