Return To Status Quo On Expiring Tax Breaks After Obama’s Veto Threat
Congress is preparing to once more extend an entire package of expiring tax breaks, thanks to an explosive veto threat from President Obama that killed a deal between Senate Democrats and House Republicans last week.
Many of these “temporary” breaks have already been extended multiple times, and there is consensus in Congress that some of them, such as a tax break for race horse owners, need to go. But Democrats favor extending most of them for another two years, while Republicans would like to make some of them permanent and get rid of the rest.
Last week, Senate Majority Leader Harry Reid and House Ways and Means Chairman Dave Camp were nearing an agreement that would have permanently extended some of the cuts — most for businesses and a few for needy individuals.
But Republicans refused to include two of the president’s favorite cuts — the child tax credit and earned income tax credit — because they could benefit the millions of immigrants recently granted amnesty by his executive order. Obama threatened to veto the deal and riled up the liberal wing of the Democrat party, so it collapsed. (RELATED: Obama Wrecks Tax Cut Compromise)
If Congress fails to act, businesses and individuals won’t be able to claim them on this year’s tax returns. Faced with the collapse of the deal and a limited amount of time before the Holidays, Congress is expected to do the bare minimum and extend the cuts through next year.
“We should ensure that the president’s actions do not hurt hardworking taxpayers and american businesses that depend on these policies,” Camp said at a committee hearing on the House version of the bill Monday. He told Politico he’s confident the short-term extension will pass.
While the news is relatively good for businesses and individuals who will benefit in the short term, some conservatives are lobbying against the bill, arguing the temporary tax breaks primarily benefit special interests.
“This legislation is mainly a hodge-podge of special interest earmarks in the federal tax code,” the Club for Growth said in a memo urging Congress to vote against the bill. “Thankfully, these extenders expired at the end of 2013, so the best thing Congress can do now is nothing.”
The move would set up another showdown next year between a Republican Congress and Obama, when the breaks would again expire. “[The bill] doesn’t do anything to make the tax code simpler or fairer or more predictable,” Democratic Rep. Hastings said in the House committee hearing Monday.
Some in the Senate think Obama intentionally wrecked Reid’s deal so he could cut a broader corporate tax reform deal with a Republican Congress next year.
“It might indicate less about the merits of the package and more about the White House using progressives to kill a deal now in order to pave the way for a deal with Republicans next Congress that progressives will absolutely loathe,” a Democratic aide told The Hill.
The House is expected to vote on the bill this week.
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