By Stephen K. Cooper and Jeff Carlson, CCH Washington Staff Writers
Once again, Congress has adjourned for a holiday break without agreeing to a tax reconciliation package for the new fiscal year. Lawmakers have been working on legislation since late in 2005, but a compromise has been hard to craft.
Republican leaders in the Senate and House of Representatives came close, but ultimately failed to reach an agreement on a $70 billion tax reconciliation measure that they had hoped to schedule for an April 7, 2006, vote. House Ways and Means Chairman William M. Thomas (R-Calif.) and Senate Finance Committee Chairman Charles E. Grassley (R-Iowa) met throughout the day on April 6 on a tax reconciliation conference report that would include an extension of lower capital gains and dividend rates as well as relief from the alternative minimum tax for one year.
The GOP leaders had given up on trying to win support from Democratic lawmakers and, instead, decided to remove some tax extender provisions from the legislation. They planned to pass those provisions--including research and development tax credits, small business expensing, and expanded IRAs--in a separate bill. Some of these provisions expired at the end of 2005.
Late on April 6, the plan fell apart, but none of the principal Republican lawmakers involved in the talks would comment on the reasons for the failure. Democrats were not involved in the negotiations.
Thomas emerged from a meeting and facetiously joked with reporters that the conferees had indeed reached an agreement, but it had not been signed--meaning that no agreement had been made. Senate Majority Leader Bill Frist (R-Tenn.) said that lawmakers would not be voting on tax reconciliation before the Easter Recess, which lasts from April 7 through April 24. Meanwhile, House Speaker Dennis J. Hastert (R-Ill.) blamed the problem on Senate negotiators.
Democrats have made the inclusion of AMT relief one of their primary requirements for passing tax reconciliation legislation. Yet, the GOP plan to include AMT relief in the measure, while dropping the tax extenders, was unlikely to win their support. Senate Democrats are especially opposed to extending lower capital gains and dividend tax rates, which do not expire until 2008, since AMT relief would have an immediate impact. Democrats also are trying to hold off extension of the reduced tax rates until after the fall's midterm elections, hoping a new Congress would drop the issue altogether.
Meanwhile, House and Senate lawmakers also failed to reach an agreement on a pension conference report. House Majority Leader John Boehner (R-Ohio) told reporters that the measure would have to wait until after the Easter Recess. House GOP leaders also postponed a vote on the $2.8 trillion budget resolution for fiscal 2007, which called for an additional $228 billion in tax cuts over five years. The non-binding budgetary blueprint was stalled by divisions within the Republican party over agency spending limits, emergency and disaster spending levels, and entitlement programs.
- Related items:
- Congress Returns to Unfinished Work
- New Tax Year Means Many Tax Changes to Consider
- Permanent AMT Fix Poses Difficult Choices
- Congress Ends 2005 Session; Tax Reconciliation Conference Ahead in 2006
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- Congress Wraps Up More Economic Gifts: New Tax Relief
- AMT Negates Tax Relief for High Earners
Added to the news on April 13, 2006.
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