Senate Democrats appear headed for a clash this year with House Republicans over a perennial problem: what to do about a raft of temporary tax breaks known as “extenders” that benefit both businesses and individuals.
In the latest crack at solving the problem, leaders of the Senate Finance Committee on Wednesday were considering a plan to vote next week on a somewhat pared package of extenders, according to several people familiar with the situation.
The plan likely would require separate votes on several provisions that are considered controversial, such as a depreciation break for race-car tracks and breaks for movie production.
It’s possible the committee -– now led by Sen. Ron Wyden (D., Ore.) -– also would hold a separate vote on an alternative-energy break that supports wind-energy production, although that wasn’t clear on Wednesday. Many Republicans oppose the wind-energy production break, although some support it.
Still, the basic process emerging in Senate negotiations this week was not likely to result in significant changes to the extenders package, given broad support in Congress for even controversial provisions, according to some. The basic package of breaks would not have to be offset with revenue increases or spending cuts, so it would add to federal deficits. That’s in contrast to some other big bills lawmakers are considering, such as reviving unemployment benefits for the long-term unemployed.
Many Democrats on the committee, including Sen. Ben Cardin of Maryland, are pushing for a two-year extension of the tax breaks, although one year is also a possibility. Mr. Cardin said he has no problem with the base bill not being offset.
Mr. Wyden declined to comment on Wednesday, saying talks with the committee’s top Republican, Sen. Orrin Hatch of Utah, were going “very well,” and he thinks the bill will have bipartisan support.
He added that he and Sen. Hatch “both feel strongly about this being the last” extenders bill.
The House is heading down a very different track, with Ways and Means Chairman Dave Camp (R., Mich.) promising to examine major extenders closely, and push for permanent extension only of the ones that are worth keeping. A number of House Republicans – although probably not a majority so far – think the entire package should be offset. That’s a tall order, given that the Senate package could cost in the neighborhood of $50 billion for one year, according to one source.
The basic problem with the extenders is that many of the tax breaks are too popular – and too important – to kill, but also too expensive to be made permanent. So Congress keeps kicking the extenders can down the road for a year or two, as the price tag keeps going up. By now, the package has grown so large that even paying for a temporary extension has become too costly for many lawmakers to consider.
Notable provisions include the research credit for businesses, as well as a break for overseas financing by multinationals. Another one, added in response to the last recession, gives larger up-front depreciation breaks on equipment and other investments; it’s being pushed for renewal by big businesses, although some critics say its benefits as a long-term policy are unclear.
In the end, the debate appears likely to grind on, without a final agreement until after the November elections. It’s possible that specific provisions in the package will become campaign issues. Many lawmakers would like to resolve the extenders problem as part of a broader rewrite of the tax code, but prospects for that have gone from dim to dimmer.