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Saturday September 20, 2014

Washington News

Washington Hotline

Baucus Chooses Tax Reform, Not Extenders

At a meeting on September 19, Senate Finance Committee Max Baucus (D-MT) was asked whether there would be a separate tax extenders bill. For the past seven years, approximately 50 separate tax provisions have been extended on a one or two year basis. These tax extenders include very popular provisions such as the IRA charitable rollover, expanded conservation easement deductions, the teachers' supplies deduction and the research and development credit.

Sen. Baucus indicated that he would not be preparing a separate tax extenders bill this year. He stated, "We are sticking with tax reform. I am not going to reward bad behavior." Baucus suggested that creating a separate bill for the tax extenders is not good legislative policy. He hopes that the Senate Finance Committee will prepare and mark up a comprehensive tax reform bill this fall.

Ranking Member Orrin Hatch (R-UT) agreed with Baucus. He suggested that it would be better to defer on the tax extenders bill and focus on comprehensive tax reform.

However, Senate Finance Members Benjamin Cardin (D-MD) and Mike Crapo (R-ID) pointed out that it may still be necessary to address extenders separately at the end of the year. Crapo noted, "If we get to a point where the tax extenders are going to expire and we are not close to moving on to some other kind of tax legislation, then I think we should extend them."

House Ways and Means Chair Dave Camp (R-MI) continued to focus his efforts on preparing a tax reform bill. Members of the Ways and Means Committee are conducting three to five meetings per week. They have submitted multiple plan requests to the Joint Committee on Taxation (JCT). Each provision requires an estimate of revenue raised or revenue cost by the JCT.

Editor's Note: Baucus and Camp have decided to focus all of their efforts on comprehensive tax reform and to sidetrack other legislation such as a separate tax extenders bill. Because passing a major tax reform act before the end of this year is a very challenging prospect, it now is quite possible that the 2014 extenders may be delayed. In past years, the tax extenders have been passed later in the year, but are always retroactive to January 1.

Federal Debt Limit and Tax Reform

As the October 18 deadline for increasing the debt limit or reducing government services approaches, the White House, the Senate and the House are all strenuously advocating their position. House Members are now discussing a potential one year increase in the debt limit. The House plan would include spending reductions as part of the bill.

The White House and Senate have strongly advocated a "clean" bill. They prefer a bill that increases the debt limit without accompanying spending reductions.

Meanwhile, House Ways and Means Committee Chair Dave Camp continues to write actual language for his tax reform bill. There is no anticipated date for markup, but committee members hope to move forward with that bill by the end of October.

House Members also have discussed methods for creating a rapid process for tax reform as part of the debt limit bill. There have been discussions that would create a process similar to the process for reducing military bases. The committee determines the appropriate bases to close and then the entire House and Senate are faced with a single yes or no vote. This "fast track" method is being proposed to apply to a tax reform bill. If the House and Senate each pass a bill and a conference committee agrees on the final bill, this method could move the process forward more quickly. House Ways and Means Member Kevin Brady (R-TX) stated, "I don't think the form of it has been agreed upon, whether it is fundamental reform itself or a timely vote up or down in both chambers, but the issue is very much alive."

Editor's Note: There clearly is a major confrontation pending between the White House, the Senate and the House over the debt limit bill. The past pattern has been strong words of advocacy from all parties, followed by an eventual negotiation and compromise. While the parties are threatening to shutdown the government, it seems probable that any shutdown would be very limited in scope and a compromise and extension of the debt limit will occur. The past compromises have included a combination of the debt limit, spending and other provisions. It is possible that a "fast track" tax reform bill could be included in the other provisions.

Published September 20, 2013
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