House moves toward temporary fix on tax break extensions

The House moved on Monday toward a vote to restore a slew of expired tax breaks, though only through the end of this year.

The vote on a short-term extension, expected as soon as this week, would come after a veto threat from President Obama derailed a developing $400 billion deal between Senate Majority Leader Harry Reid (D-Nev.) and House Ways and Means Chairman Dave Camp (R-Mich.) that would have extended some expired tax breaks indefinitely, as well as others for two years.

{mosads}Republicans on both side of the Capitol suggested the move showed that a one-year deal was the only proposal with a chance of becoming law.  

The House posted its one-year deal to restore the expired provisions on Monday, setting up a vote on the measure as soon as Wednesday.  

The $45 billion bill would extend practically all of the more than 50 individual and business provisions that expired at the end of 2013, and a pair of incentives scheduled to expire at the end of this year. 

“As a practical matter, we’re out of time,” one GOP aide said. 

But the proposed one-year deal also continued to put Democratic divisions on display, after the clash between the White House and Reid last week. 

Senate Finance Chairman Ron Wyden (D-Ore.) huddled with his fellow Democratic tax writers in the Capitol on Monday evening, and said after the meeting that he was no fan of the one-year approach.  

“I’m not taking a position tonight. I can tell you that certainly what I’m going to do is continue to talk with colleagues, before I make any final judgments,” Wyden told reporters. “This game is not over.” 

Sen. Jay Rockefeller (D-W.Va.), a senior Finance member, was even blunter, insisting that there was no way he would back a one-year deal. 

“Absolutely not. No way shape or form,” Rockefeller said. “And nobody in that meeting was.”  

But a spokesman for Rep. Sandy Levin (Mich.) said the top Democrat on the House Ways and Means Committee would back the GOP’s one-year approach. Levin later released a statement.

“I actively and publicly opposed last week’s proposal that would have given permanent tax breaks to a relative few, while costing more than $400 billion and leaving out critical provisions that help working families,” Levin said. “This one-year extension avoids that damaging proposal.”

House Republicans have warned for weeks that a one-year deal on the tax “extenders” would be the best they could do if lawmakers fell short on a broader deal, even though tax writers from both parties have said that such an agreement would make it difficult for companies and families to plan for 2015.

Under a one-year deal, a fully GOP Congress would have to consider the temporary incentives again next year. 

Lawmakers have long thought most of the breaks would at least get a temporary extension in the lame-duck session. The Senate Finance Committee cleared a measure this year that would extend most of the provisions through 2015. 

“I would’ve preferred the two-year package. I thought we did a really good job in committee,” Sen. Orrin Hatch (Utah), the top Republican on the Senate Finance Committee, said about a deal he crafted with Wyden. “It’s something that should’ve been given a little more credibility than it was.”  

The deal that Obama threatened to veto would have extended priorities of both parties for good, including a tax break for state and local sales taxes that is especially important to Reid’s home state of Nevada. 

Business-friendly priorities like the research credit and an incentive for expensing would have also been revived indefinitely, as would tax breaks for commuters using mass transit and for families to help pay college costs.

Democrats’ main problem with the agreement was that it didn’t lock in expansions of the incentives for the working poor — the Earned Income Tax Credit and the child tax credit — that are set to expire in 2017. 

Sen. Sherrod Brown (D-Ohio), a fierce critic of that plan, said that Democrats would have surrendered to the GOP’s more business-friendly approach and abandoned working families if they’d accepted that deal.

“They may be in the majority, as they will next year, but that doesn’t mean you sacrifice your principles,” Brown told reporters. 

Republicans have long complained about taxpayers and illegal immigrants fraudulently claiming those credits and said that Obama’s recent actions on immigration made it difficult for them to accept further extensions of the two tax breaks.

Wrapping up a deal quickly would also reduce any threats to the upcoming filing season. The IRS has warned that it might have to delay tax refunds if an extender deal didn’t materialize soon.

Updated at 8:20 p.m. to include additional information, and at 9:19 p.m.