Senators closing in on major tax deal

Senate negotiators are ready to sign off on a major tax deal that would make permanent two popular business tax breaks as well as expanded tax relief for lower- and middle-class families.

A source close to the talks said the package could come out Thursday and predicted it would impose a two-year moratorium on two unpopular ObamaCare taxes, the Cadillac tax on expensive plans and the medical device tax.

{mosads}It would make permanent the expansions of the child tax credit, the earned income tax credit and the American Opportunity Tax Credit for college tuition, core pieces of President Obama’s 2009 stimulus package.

But it would not index the child tax credit to inflation, a source of tension between Senate and House Democrats. Senate Democrats are willing to leave the indexing measure out of the package, something that has prompted an objection from House Minority Leader Nancy Pelosi (D-Calif.), say sources familiar with the talks.

Senate Democrats also want to peg child tax credit to inflation but they’re not willing to let it derail the larger deal.

The inclusion of language freezing the Cadillac tax, a high priority of Senate Democratic Leader Harry Reid (Nev.) because it hits union health plans especially hard, is a tough pill for some Republicans to swallow.

“We’re for tax cuts but this is something that organized labor and other parts of the Democratic base hate,” said Senate Republican Whip John Cornyn (Texas). “It’s good leverage for some other things that we need.”

Nevertheless, a GOP source familiar with the talks predicted Republican lawmakers would go along with it in the end. 

Republicans would get permanent extensions of the research and development tax credit and the Section 179 small-business expensing deduction.

A proposal favored by the White House to address a shortage of funds in a risk adjustment program for insurance companies that lose money because of ObamaCare is off the table, GOP sources say. 

“If it was up to the Senate, we would be ready to sign the deal now,” said Sen. Ben Cardin (D-Md.), a member of the Finance Committee, who added that doesn’t mean he necessarily supports all its provisions.

Cardin added that there is basic agreement among Senate negotiators on the tax provisions but that unresolved questions remain over lifting the oil export ban and other issues.

“From the point of view of what would be considered extender package and the related issues, I think that’s pretty close in the Senate,” he added.

When asked whether Senate negotiators are poised to sign off on a big package instead of a two-year fallback plan, Senate Finance Committee Chairman Orrin Hatch (R-Utah) said, “That’s right, that’s probably true.”

“We’d like to make the extender package permanent but we’re open to what the House can do and wants to do,” he added.