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House Unlikely to Change
Senate-Passed Bill
The
House of Representatives, which will debate the President's and
Senate Republicans' tax cut compromise today, is the final obstacle
to extending the 2001 tax cuts through 2012.
Yesterday, the Senate overwhelmingly approved the compromise by a
vote of 81-19, a margin that puts a great deal of pressure on the
House to approve the measure without amendment, despite a group of
liberal Democrats who will seek a higher estate tax rate through an
amendment that is expected to fail.
Included in the two-year tax cut
bill:
- Current income tax rates extended for
all income levels.
- An Employee-Side Payroll Tax Cut of
Approximately 2%: The agreement includes an employee-side
payroll tax cut for over 155 million workers - providing tax
relief of about $112 billion next year.
- The Child Tax Credit: The $3,000 refundability threshold established in the
Recovery Act for the Child Tax Credit will be extended under the
agreement, ensuring an ongoing tax cut to 10.5 million
lower-income families with 18 million children.
- The American Opportunity Tax Credit:
The new American Opportunity Tax Credit - a partially refundable
tax credit that helps more than 8 million students and their
families afford the cost of college - will be continued under
the agreement.
- 100 Percent Expensing: The agreement
includes the President's proposal to allow businesses to expense
100% of their investments in 2011.
- Extension of Unemployment Benefits:
The agreement extends emergency unemployment benefits at their
current level for 13 months, preventing an estimated 7 million
workers from losing their benefits over the next year as they
search for jobs.
- 1603 Renewable Energy Grants: The
agreement extends the 1603 program, which was created to support
job creation and retention in the wind and solar industries.
Congressional Democrats ignored the issue of expiring
tax cuts for most of this year, instead focusing their large
majorities on passing health care and financial services
reforms. Due to the struggling economy, and the results of the
elections, Republicans gained an upper hand in the tax cut
debate. Furthermore, the Republican Caucus in the Senate was
able to prevent other Democratic legislative priorities from being
considered in the post-election session by demanding that tax cuts be
finalized first.
The strategy worked, leaving Democrats only a handful of days to
address other priorities such as repealing Don't Ask, Don't Tell,
ratifying an arms control treaty with Russia and dealing with
immigration reform before time runs out on the 111th Congress.
Majority Leader Harry Reid (D-NV), who controls the Senate's
schedule, has threatened work through the weekend, next week, and
perhaps even following Christmas. The 112th Congress convenes
on January 3.
If you have any questions concerning these issues,
please contact Chris Wagner at 202.772.0924 or cwagner@clarkhill.com.
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