Bipartisan Talks Aimed at Making Tax Breaks Permanent -- 2nd Update
November 30 2015 - 8:04PM
Dow Jones News
By Richard Rubin
WASHINGTON--U. S. lawmakers are nearing a deal to make several
lapsed and expiring tax breaks permanent, seeking a bipartisan
accord that would provide certainty to households and businesses
but also widen the budget deficit by more than $500 billion over
the next decade.
A deal hasn't been announced, and the talks could still collapse
or change significantly in the final days before Congress adjourns
for the year.
"I think we'll get it done," Orrin Hatch (R., Utah), chairman of
the Senate Finance Committee, told reporters on Monday. "There's no
guarantee we're going to get it. I'm working hard to do it and
we'll see what happens. We're open. We know that there's some
things that I don't like that we're going to have to take."
Any potential tax agreement could provide victories for
congressional Republicans and their business allies as well as
Democrats and the Obama administration. It would also face likely
criticism from the wings of both parties and from deficit
hawks.
Republicans could win permanent extensions of the research and
development tax credit, the deductibility of state sales taxes and
a handful of other business tax breaks that expired at the end of
2014. The GOP would also get an extension, though perhaps not
permanent, of bonus depreciation, a tax break for capital
investment that's been in place in some form since 2008. Hatch said
the depreciation issue is being "heavily fought."
Democrats would get permanent extensions of tax credits for
low-income families that are expiring at the end of 2017. They
could also get an extension of the solar energy tax credit. The
wind energy credit could also get extended and would be phased out,
Hatch said.
Delays of two pieces of Obamacare--the medical device tax and
the Cadillac tax on high-cost health insurance--could also be
included, Hatch said. Those taxes have bipartisan opposition.
A sticking point emerged over adjusting the child-tax credit and
the American Opportunity Tax Credit, which helps cover college
expenses, for inflation. Republicans oppose adjusting the tax
credits for inflation, but Democrats insist that the credits
increase along with inflation.
"It's critically important to us," said Rep. Steve Israel (D.,
N.Y.) after leaving a Monday evening House Democratic meeting.
"Given what the Republicans are trying to load into this bill, if
they can't at least give us that it's going to be very difficult"
to win Democratic support for the broader tax package, he said
The child tax credit has been set at a $1,000-per-child maximum
since 2003, and the tuition credit has been capped at $2,500 since
2009. Many other parameters of the tax code are adjusted for
inflation.
The tax talks add another layer of complexity to what is likely
to be a busy December in Congress. Lawmakers are also trying to
reach final agreements on a long-term highway bill and set agency
budgets for fiscal 2016.
"We'll get this done before the end of the year," House Majority
Leader Kevin McCarthy (R., Calif.) said on Monday. "I would love to
see some permanency. We'll see what mix we can get."
There are dozens of other breaks that lapsed at the end of 2014
and many of those might only get extensions through 2016. Some
enjoy a broad bipartisan consensus, such as the ability to make
direct charitable contributions from individual retirement
accounts. Others, such as tax credits for renewable energy and
faster write-offs for investments in motor sports tracks, divide
lawmakers.
There are many potential pitfalls in the complex and fragile
negotiations. The budgetary impact of the plan may scare away some
votes, but the total price tag will be misleading. In many cases,
Congress was already adding to the deficit in smaller chunks with
periodic extensions of widely supported breaks, and permanent
extensions just combine what would otherwise be several laws over
the next decade into one.
"Everybody has to look at it and say, let's do the art of the
doable," Hatch said.
Also, the administration has been resisting extensions of bonus
depreciation. Republicans have been seeking changes to the earned
income tax credit, to reduce fraud, and to the child tax credit, in
a bid to prevent payments to illegal immigrants.
"We'll find some resolution of that," Hatch said. "We know the
EITC has fraud in it. On the other hand, it's an important program
that requires work."
Kristina Peterson and Siobhan Hughes contributed to this
article.
Write to Richard Rubin at richard.rubin@wsj.com
(END) Dow Jones Newswires
November 30, 2015 20:49 ET (01:49 GMT)
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