TAX NEWS - June 2010

GOP Amendment To Senate Tax Bill Puts Focus On Spending

Senate Republicans sought to paint Democrats as profligate spenders, as they unveiled an alternative Thursday to a Democrat- backed bill to extend jobless benefits and expired tax breaks.

Like the Democratic bill, the GOP alternative from Sen. John Thune (R., S.D.) would extend federal unemployment benefits through November and renew the tax cuts for businesses and individuals.

But the Republican bill leaves out a tax increase on fund managers and proposals to close tax loopholes used by small business owners and global firms. It would also cut discretionary, nondefense spending programs by 5% across the board and freeze federal workers' pay for one year, among other spending cuts.

The amendment has little chance of passage, given that the spending cuts have failed in the Senate on past GOP attempts. But it gives the GOP the chance to challenge Democrats on their willingness to rein in spending.

The Senate on Tuesday will resume considering amendments to the jobless benefits package, with the hope of concluding work on the bill by the end of the week. The bill would then return to the House for approval of the changes made by the Senate.

The pending bill from Senate Finance Chairman Max Baucus (D., Mont.) would spend about $140 billion. It is partly offset with the tax hike on fund managers and the loophole closers, so that it would add a net $85 billion to the deficit over 10 years, according to the Congressional Budget Office.

The Thune proposal would reduce the deficit by $53.5 billion, according to the CBO.

In addition to the spending cuts mentioned above, the bill would redirect $ 37.5 billion in unspent stimulus funds for deficit reduction.

In other differences with the Democratic proposal, the GOP alternative does not include $24 billion in fiscal aid to states nor does it include $4 billion to settle lawsuits brought against the government by black and American Indian farmers.

It would prevent scheduled cuts in Medicare payments to doctors through 2012; the Democratic bill would do so only through the end of 2011.