Congress closes in on tax break extension

Momentum is building for a one-year extension of a slew of expired tax breaks despite resistance from liberal Democrats in the Senate.

The House is expected Wednesday to easily approve legislation worth $45 billion that would restore dozens of tax breaks that lapsed at the end of 2013 only through the end of the current year.

With the White House signaling it can live with the legislation, and House Democrats expressing support, Senate Majority Leader Harry Reid (D-Nev.) must decide whether to overrule members of his caucus who take issue with the plan.
{mosads}Reid on Tuesday sounded open to taking up the House bill, only telling reporters, “Let’s see what they send us, what’s in it, and we’ll make that decision then.”

But there are also already signs that the Senate will end up accepting the House plan, as the tax provisions continue to divide Democrats in the wake of their losses at the polls last month.

Reid told Senate Finance Committee Chairman Ron Wyden (D-Ore.) that the one-year deal is the most likely path if Wyden can’t negotiate a better package, according to a person familiar with the Democrats’ meeting on Tuesday.

Aides on Capitol Hill also speculate that Reid won’t want to waste precious floor time to alter the House tax bill, given that the Senate already has a crowded schedule that likely includes a government funding measure and a major defense bill.

Plus, staffers say the majority leader might not want to put much more effort into the expired tax breaks, after seeing his efforts to craft a broader bill on the provisions torpedoed by the White House and congressional liberals last week.

Even so, Democrats on the tax-writing Finance Committee said they weren’t willing to give up on enacting their preferred approach, which committee passed earlier this year and would extend most of the incentives through 2015.

On Tuesday, Democratic tax writers called the House approach irresponsible and too tilted toward business interests, but stopped short of saying they would oppose it. The bill from House Ways and Means Committee Chairman Dave Camp (R-Mich.) would not extend a healthcare tax credit for workers who lost their job, or incentives for electric motorcycles, a pet provision of Wyden’s.

The stakes are especially high for Wyden, who Republicans blame for helping to undercut the budding deal between Reid and Camp last week with other congressional liberals. Now, Wyden is fighting against the House short-term bill, even as his allies in killing the broader deal last week have deemed it acceptable.

“I think I would characterize it as game on,” Wyden said Tuesday, a day after Finance Democrats huddled to start discussing the GOP plan. “The House proposal, on a number of important particulars, really clobbers working-class families.”

At issue are a collection of more than expired tax incentives, which include business preferences like the credit for research and provisions for small business expensing. The pile of tax breaks also includes preferences for distressed homeowners, workers who commute by mass transit and some derided as corporate pork — like incentives for racecar track owners and the Puerto Rican rum industry.

Both lawmakers and the corporate community have called the one-year deal the worst possible solution outside of no deal at all.

Under the one-year plan, Republicans would have to deal with the tax breaks again next year when they have full control of Congress. The chairman of the Business Roundtable, an organization of corporate chief executives, added Tuesday that he just hoped “we can mitigate a massive tax increase.”

On Tuesday, Republicans on both sides of the Capitol coalesced even further behind the one-year deal, as they continued to blast the president for stopping a more than $400 billion proposal that would have indefinitely restored priorities for both sides. “The president killed it. Period,” Speaker John Boehner (R-Ohio) said Tuesday morning.

Both Camp and Sen. Orrin Hatch (R-Utah), the incoming chairman of the Senate Finance Committee, maintained that they expected the one-year deal to eventually find its way to the president’s desk.

“I think it’s safe to say that the president and his liberal allies are unlikely to get a better tax extenders deal in the next Congress than the one the Senate Democratic leadership had been negotiating up until last week,” Hatch said.

Camp also insisted that excluding the electric motorcycle incentive was an oversight, and that the healthcare credit was left out because it’s previously been dealt with in broader trade negotiations.

“This was all supposed to go another direction,” said Camp, who also stopped short of characterizing the House bill as a take it or leave it offer. “I think it’s ultimately the vehicle that will be enacted.”

But while some Senate Democrats prepared to put up a fight over that vehicle, both Treasury Secretary Jack Lew and Josh Earnest, the White House press secretary, suggested the deal would be both acceptable and far preferable to the deal that Reid was negotiating last week.

Top House Democrats like Minority Whip Steny Hoyer (Md.) and Rep. Sandy Levin (Mich.), the ranking member on the Ways and Means panel, said they were on the board with the deal, suggesting it would pass with a bipartisan majority on Wednesday.

A Treasury spokeswoman said that Lew told House Democrats on Tuesday that “the administration is open to supporting shorter-term alternatives.” According to a person in the meeting, Lew also didn’t signal much of a preference between the one-year deal developed in the House and the two-year deal that passed Senate Finance.

“There are virtues to a one-year extension,” Lew told House Democrats, according to a person in the meeting. “There are virtues to a two-year extension.”

That could leave little room to negotiate for tax writers like Wyden and Sen. Sherrod Brown (D-Ohio), who blasted the House deal for leaving out the healthcare tax credit for workers. Others, like Sen. Debbie Stabenow (D-Mich.), were already trying to cast the blame on Republicans for pushing the one-year deal, and to suggest that Republicans will end up wishing they had agreed to a two-year package.

“If they want to do a one-year extenders bill, retroactively, they’re creating a mess for themselves next year,” Stabenow told reporters. “And we don’t believe that’s responsible.”

— Mike Lillis contributed.

This story was updates at 7:04 p.m.