TAX NEWS - June 2010
Spending Bill Set Back in Senate
Senate Finance Chairman Max Baucus (D., Mont.) announced the changes hours after a test vote demonstrated deep concern in both parties with the wide-ranging legislation.
The bill would revive lapsed unemployment benefits, extend assistance to cash-strapped states and renew several tax breaks that expired at the end of 2009, including a credit supporting business research. But a procedural issue that effectively became a referendum on the legislation was defeated on a 52 to 45 vote, failing to attract even a simple majority of the Senate, let alone the 60 votes needed to overcome a Republican filibuster and ensure the legislation's passage.
With support lacking, Democratic leaders moved to narrow benefit payments to unemployed workers and pare a costly proposal that would suspend long-planned cuts in Medicare payments to physicians. Those changes alone would trim a little more than $20 billion from the legislation, which came with an original price tag of more than $120 billion, and would result in "more than half" of the bill now being paid for, said Sen. Baucus.
Mr. Baucus voiced hope the moves would solidify support among Democrats and some Republicans, and help propel the bill toward passage. "I'm looking for something above 60...so that we can move forward," he said. A final vote could come by week's end.
Changes were also made to a proposed tax on income earned by managers of hedge funds and other investment partnerships. Among other things, the changes would ease the impact of the tax on the sale of shares in investment-management partnerships, while imposing a slightly higher tax on so-called "carried interest" income earned by fund managers.
A handful of Democrats have voiced concern about the new tax, including Indiana Democratic Sen. Evan Bayh, one of 11 Democrats who broke with party leaders on Wednesday's vote.
Bayh spokesman Brian Weiss said the senator supported the tax on carried interest but had concerns about its impact on the sale of investment-management partnerships. Mr. Weiss said the senator was also worried about the overall cost of the bill, among other things.
The tax on investment managers is part of a broader package that would impose new levies on oil companies and U.S. multinationals, among others, to help pay for the legislation. Before the late-day changes, several senators voiced concern about the bill's impact on the deficit, which would be boosted this fiscal year and next.
"We're trying to get some fiscal discipline around here," said Sen. Judd Gregg (R., N.H.), expressing concern about the bill's impact on the budget. "This should be one place to start."
Sen. Dianne Feinstein (D., Calif.) was among those Democrats who supported the bill Wednesday. But she said a growing number of lawmakers weren't as willing as they were during the recession to extend jobless benefits, especially with the mounting national debt. Europe's debt crisis has shoved the issue back into the spotlight.
"We have 99 weeks of unemployment insurance now. The question becomes how long do you continue it before people just don't go back to work at all?" Sen. Feinstein said.
Despite budget concerns, senators later approved an amendment 60-37 that would extend the time individuals have to qualify for a popular tax credit supporting home purchases. The credit is due to expire June 30. Under the amendment, pushed by Senate Majority Leader Harry Reid (D., Nev.), buyers would still have had to enter into purchase contracts by April 30 to qualify for the tax credit. But they would now be given until Sept. 30 to close the purchase.
© 2009-2012 TaxRates.cc
2011 - 2012 Tax Rate Guide and Tax Help Website
