House Majority Leader Hoyer Tuesday vowed that Congress would not pass extensions of expiring tax breaks important to the business community this year unless they are offset with revenue-raising provisions.
"The extender bill is not going to pass unless it's paid for," Hoyer said in a brief interview. When asked if he would make a similar pledge regarding the $62 billion cost of preventing the alternative minimum tax from hitting 21 million more taxpayers, Hoyer demurred. "The extender bill is not going to pass if it's not paid-for," he repeated.
Hoyer's comments reflect a reality that leading Senate Democrats and many in the House have acknowledged, that Democrats lack the votes to pass an offset AMT patch.
The realization comes much sooner this year than it did last year, when House and Senate Democrats were wrangling over the issue just before Christmas. "Quite frankly, we all know it's not going to be paid for, so why go through all the motions?" said Senate Finance Chairman Max Baucus.
Industry sources said Democratic leaders appear to be serious about offsetting the extenders. "Republicans are slowly realizing they are losing ground on the pay-fors ... nobody in Peoria cares about Subpart F or CFC look-through," a lobbyist said, referring to two complicated tax breaks for multinational companies in the extenders' package.
If Republicans do not come around on offsets, another lobbyist said, "I think we're in a place where it's very possible the extenders could expire."
Senate Republicans are determined to make it difficult for Democrats to pay for the extenders package, which includes provisions such as renewable energy incentives, state sales tax deduction and a research and development credit that have broad support on both sides of the aisle. Republicans note that Democrats made similar vows last year to offset the AMT patch, only to cave in the end.
Hoyer's comments came shortly after the Senate failed to invoke cloture on a motion to proceed to a House-passed tax bill extending the various individual and business tax breaks.
Senate Majority Leader Reid called up that measure to serve as the vehicle for a slate of changes proposed by Baucus, including the addition of an AMT patch without offsets. The cloture vote failed, 50-44, although Baucus said he was discussing with Reid and Republicans when and how to bring the measure to a vote again, as early as next week.
The vote was a demonstration of arcane Senate procedure, with the result being each side was able to claim some credit.
Republicans were able to say it was not a vote on the AMT, because the underlying motion was to proceed only to the House bill, which does not contain an AMT fix.
Since the vote effectively blocked a subsequent vote on Baucus' substitute, Democrats were able to say Republicans were standing in the way of broad-based tax relief.
"At a time when Americans are struggling with skyrocketing energy prices, including paying over $4 a gallon for gasoline, Senate Republicans blocked debate on important legislation that would have provided tax relief for low-income families and spurred on investments in job-creating research and development and alternative energy," Sen. Barack Obama, D-Ill., the Democrats' presumptive presidential nominee, said in a statement. Obama, who was absent for the vote, took particular umbrage that a tax credit for the installation of biofuel pumps at gas stations was blocked, saying that was "a provision I helped to enact in 2005."
Republicans said offsets should not be required for extensions of existing, temporary tax policies, because the offsets are likely to become permanent.
Senate Finance ranking member Charles Grassley said Democrats were promoting a double standard in that expired mandatory spending and discretionary spending do not require offsets. "This double standard is like a game of billiards. In this billiard game, the taxpayer sits in the path of the pay/go '8 ball' and the big spenders hold the cue stick," Grassley said.
That idea that Democrats might have some momentum was demonstrated by Sen. Bob Corker, R-Tenn., a surprise 'yes' vote on cloture.
He said one of the bill's major offsets, cracking down on tax breaks for hedge fund managers' offshore deferred compensation, was "appropriate," which he said some hedge fund managers admitted to him privately.
"I have to tell you, my big fear is our tremendous lack of fiscal responsibility here," Corker said. "And that's why I supported this particular bill."
Corker criticized provisions such as a $1.6 billion break for trial attorneys and a $2 billion provision, dubbed the "Schumer earmark," after Sen. Charles Schumer, D-N.Y., to restructure New York Liberty Zone credits, which local officials want to use build to build a rail link from Manhattan to John F. Kennedy International Airport in Queens. "Those were offensive to me," Corker said. "You know with those out, I certainly think the bill has less opposition, if you will."
While the bill was currently in "political limbo," recent movement demonstrates that lawmakers are concerned about the expiring provisions, said Monica McGuire, executive secretary of the R&D Credit Coalition. "I'm actually optimistic because there was a cloture vote today. In January, February, March, April, there wasn't any talk about tax extenders. That raised my blood pressure," she said.
This article appears in the June 14, 2008, edition of National Journal Daily.