By Stephen Cooper and Paula Cruickshank, CCH Washington Staff Writers
As the calendar year quickly approaches its end, Congress is rushing to finish its work on a number of tax bills under consideration.
The House of Representatives overwhelmingly passed three tax bills on December 7, 2005--the Stealth Tax Relief of 2005, the Gulf Opportunity Zone Act of 2005 and the Tax Revision Act of 2005. The next day, the House passed the Tax Relief Extension Reconciliation Act of 2005 by a vote of 234-197. The latter is a $56.5 billion measure that must now go to conference with the Senate, which passed a different version of the legislation, the Tax Relief Act on November 17.
In addition to extending the lower tax rate on capital gains and dividends through the year 2010, the House's reconciliation bill includes a host of expiring tax provision that are widely supported by lawmakers from both parties. Among its many provisions, the House bill would extend the research and experimentation tax credit, the state and local sales tax deduction, the Archer Medical Savings Accounts, and tax incentives to revitalize the District of Columbia.
The House-Senate conference on the tax reconciliation bill could begin during the week of December 12 when the Senate returns from recess. However, GOP leaders have expressed doubt about whether a conference report will come to a vote before the year 2006.
In a statement of administration support, the White House said the capital gains and dividend provisions had directly contributed to strengthening the nation’s economy and produced additional revenues that reduced the federal budget deficit. "These extensions are necessary to provide certainty for investors and businesses and are essential to sustaining long-term economic growth," the administration said.
"Today's vote was about extending crucial tax relief and sustaining the economic growth the U.S. has experienced since Republicans enacted tax relief in 2003," said Ways and Means Chairman William M. Thomas (R-Calif.).
Democratic lawmakers charged that the tax cuts would increase the federal budget deficit, despite claims by Republicans that the tax cuts would pay for themselves by generating new jobs. "In five short years, the Republican Party’s failed economic policies have instigated $1.57 trillion in budget deficits and added $3 trillion to the national debt," said House Minority Whip Steny Hoyer (D-Md.).
The Stealth Tax Relief of 2005, passed by a vote of 414-4, would provide taxpayers with one year of relief from the alternative minimum tax at a cost of $31.2 billion over five years.
"Although the AMT was created to prevent a limited number of taxpayers from avoiding income taxes, it is now penalizing millions of hard-working Americans and their families," said Ways and Means Rep. Thomas A. Reynolds (R-N.Y.). He called the bill "a crucial first step" towards permanently repealing the AMT.
During floor debate, Ranking Member Charles B. Rangel (D-N.Y.) questioned why House Republicans would want to pass AMT relief as a separate bill, rather than including it in a tax reconciliation measure that is protected from amendments in the Senate. Rangel predicted the House AMT bill is on a "road to nowhere" and would stall after House passage.
Senate Finance Committee Ranking Member Max Baucus (D-Mont.) said the Senate version of AMT relief that is included in the Senate-passed tax reconciliation bill from December is a better piece of legislation. "We should strive to meet the Senate’s standard on AMT now, and work together to repeal this stealth tax altogether," Baucus said.
The House also passed a hurricane tax relief bill by a vote of 415-4. The measure would create a gulf opportunity zone comprised of the counties and parishes in Louisiana, Mississippi and Alabama that were devastated by Hurricane Katrina.
Among its many provisions, the bill would expand the low-income housing tax credits program, increase the rehabilitation tax credit program, extend business travel deductibility, provide a 50 percent bonus depreciation deduction, and increase business expensing for small businesses and clean-up costs. No cost estimate was available on this bill.
The hurricane tax relief bill also extends provisions included in the Katrina Emergency Tax Relief Act of 2005 to individuals affected by Hurricanes Rita and Wilma. As a concession to Rep. Frank Wolf (R-Va.), the bill restricts tax incentives from being extended to businesses such as private or commercial golf courses, country clubs, massage parlors, tennis clubs, skating facilities, racquet sports facilities, hot tub facilities, suntan facilities, or racetracks.
Wolf said he hoped the limitation on tax incentives for redevelopment would remain in the bill once it emerges from conference with the Senate. He said the conference report might come to a vote before Congress adjourns during the week of December 19.
Rep. Sheila Jackson-Lee (D-Tex.) and Rep. Shelley Berkley (D-Nev.) said the bill unfairly excludes gambling, which is a legal industry that provides thousands of jobs and produces of millions of dollars in taxable revenue each year.
In addition, the House voted 423-0 to approve a miscellaneous tax bill that costs $153 million over ten years. Among its several provisions, the bill would treat combat pay as earned income under the earned income credit.
"Some tax provisions couldn't be included in the reconciliation bill because of budget or Senate rules, but these important provisions still need to be extended," said Ways and Means Chairman Thomas.
Meanwhile, the White House supports the AMT patch and continues to push for making permanent the capital gains and dividends tax cuts that were just extended. White House Press Secretary Scott McClellan said that the administration is working with Congress on AMT relief. "The President wants to make sure that more middle-income Americans are not being hit by the alternative minimum tax, and that the tax relief we provided to those Americans, all Americans, is not taken away because of the alternative minimum tax," according to McClellan.
Following a White House meeting with members of President Bush’s economic team on December 7, Treasury Secretary John Snow stressed that it was important for Congress to pass the capital gains and dividends tax provisions in the tax reconciliation bill in 2005 in order to assure the markets.
Extending these two investment incentives in 2005 has become a sticking point
in the reconciliation process, given some members of Congress are
skittish about passing these provisions at the same time lawmakers are proposing
a plan endorsed by state governors to slow the growth in Medicaid entitlements by up to $50 billion over five years, reducing annual increases in the program from 7.3 to 7.1 percent over that time.
White House officials maintain that permanent tax relief is necessary in order to provide certainty in the tax code for business planning purposes. In addition, Snow advised reporters that making capital gains and dividends tax cuts permanent is beneficial not only to Wall Street but to everyone who participates in 401(k) and other retirement savings plans.
- Related items:
- Tax Reform Panel Releases Final Report
- IRS Still Trying to Deliver 2005 Refunds
- AMT Negates Tax Relief for High Earners
- Tax Rate Projections for 2006
- IRS Temporarily Raises Standard Mileage Rate
- Sales Tax Holidays Offer Consumer Savings and Business Opportunities
- New Reforms of Flexible Spending Accounts Will Benefit Employees
- National Tax Reform Panel Listens to Options, Obstacles
- CEA Report Examines Tax Reform Options, Predicts Sustained U.S. Economic Growth
- Over $2 Billion In Unclaimed Refunds From 2001 Faces Looming Deadline
Added to the news on December 13, 2005.
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