TAX NEWS - June 2010

Tax and Benefit Extensions Ready for Floor Action

The chairmen of the House and Senate tax-writing committees unveiled a compromise package of tax cuts and benefit extensions Thursday as Democrats began a tough push to clear the measure before the Memorial Day recess.

The House could consider the measure as early as Friday if leaders can persuade moderate Democrats to vote for it even though it would increase the federal budget deficit.

It also remains unclear whether Senate Democrats will be able to muster the 60 votes they will need to advance the package.

The bill is the product of months of negotiations that transformed a $31 billion package of tax-cut extensions passed by the House in December into a measure that could approach $200 billion and include everything from assistance for disaster-stricken farmers to extra pay for some veterans to a $1 billion contribution for the National Housing Trust Fund.

The core of the bill would extend through this year dozens of tax breaks that expired at the end of 2009, along with expanded unemployment benefits and eligibility for COBRA health insurance subsidies for jobless workers.

Among the tax breaks to be extended are the research and development tax credit for businesses, the state sales tax deduction for individuals and incentives for biodiesel production.

The bill also would extend special Medicaid assistance to states through June 30, 2011, at a cost of $24 billion over 10 years, and would extend an emergency fund for low-income families.

The bill would prevent scheduled cuts to doctors' reimbursement rates under Medicare through 2013 while allowing for possible increases for primary and preventive care. The extension is shorter than the five-year physician payment adjustment that many House Democrats had sought, and it was pared back over the past few days to make Senate passage easier.

The legislation could still encounter trouble — particularly among moderate House Democrats and Senate Republicans — over the amount and content of its revenue-raising offsets. Democrats will need support from at least one GOP senator to surmount a filibuster.

Only about $50 billion of the measure is expected to be offset, and that is paired with the tax breaks. The safety-net spending is treated as emergency spending, adding to the deficit.