Possible US Tax Deal Would Give Big Wins to Both Parties
With leaders hoping to adjourn Congress for the year within days, chance for both political parties to declare important victories helps to spur effort to clinch agreement
WASHINGTON — An eleventh-hour drive by the White House and Congress to strike a deal extending dozens of mostly obscure tax cuts could end up delivering major political victories for President Barack Obama and House Speaker Paul Ryan. With little more than a year left in office and facing a frequently hostile GOP-led Congress, Obama was hoping an agreement would burnish his legacy by making permanent some expiring tax cuts for millions of families with lower-to middle incomes, younger children and college students. Many congressional Democrats would revel in achieving that, especially with uncertainty about which party will control both ends of Pennsylvania Avenue in 2017. Enactment would mean "one of the strongest anti-poverty efforts in a long time," said Oregon Sen. Ron Wyden, top Democrat on the tax-writing Senate Finance Committee. Republicans wanted to make permanent expiring business tax breaks worth perhaps hundreds of billions of dollars. GOP lawmakers in the Senate and House would consider that alone to be a victory. Yet for Ryan, R-Wis., accomplishing that would also make one of his top 2016 priorities more affordable — an election-year bill revamping the tax code. Renewing those business tax breaks now would mean he wouldn't have to include them in next year's sweeping overhaul, freeing up money Republicans could instead use to help push income tax rates lower. "A significant package would provide certainty for families and job creators while helping to show the real cost of fixing our tax code," said Ryan spokesman Brendan Buck. With leaders hoping to adjourn Congress for the year within days, the chance for both parties to declare important victories was helping to spur their effort to clinch a tax agreement. "Here we have an opportunity in one tax bill to bring a win-win to both Paul Ryan and the president," said Scott Hodge, president of the conservative Tax Foundation. But obstacles remained for the tax measure and separate legislation financing government agencies next year and preventing a federal shutdown. Around 50 tax breaks for individuals and businesses expire annually and Congress goes through a once-a-year ritual of renewing them. That's largely because of political optics: A short-term tax cut has a much smaller price tag than a long-term reduction, making it easier for many lawmakers to support. This year's collection would renew many tax reductions that expired at the beginning of 2015. The legislation Congress is working on would retroactively restore and extend them so taxpayers could claim the breaks on their 2015 and 2016 returns. The reductions for individuals include breaks for some out-of-pocket expenses by teachers, charitable contributions seniors make from the Individual Retirement Accounts and parking expenses. On the business side, reductions include breaks for some railroad track maintenance, training mine rescue teams, race horses and building energy efficient homes. Obama and Democrats were trying to make permanent tax credits of up to $1,000 per child that go to many lower- and middle-income families; tax credits up to $2,500 for college students; and earned income tax credits for low-income married couples and families with three or more children. Unless Congress acts, those tax breaks will become smaller starting in 2018. Republicans were pushing for steps they said would help prevent fraud in those programs, such as requiring recipients to provide Social Security numbers or other identifying information. Republicans want to make permanent the ability of people in states without an income tax to deduct local sales taxes on their federal returns; tax breaks businesses get for research and development costs and for buying new equipment; and some levies on companies doing business overseas. The GOP also wants to end the decades-old ban on U.S. oil exports. Democrats were insisting on trade-offs, including making permanent tax breaks for solar and other alternative energy sources. The White House, against the will of some congressional Democrats, was resisting Republican attempts to pare taxes on medical devices and costly health insurance policies, which were enacted under Obama's 2010 health care law to help pay for that overhaul. "We're always willing to engage in conversations about ways to strengthen the ACA that don't harm health care access, affordability, quality or the middle class," said White House spokeswoman Katie Hill, using the acronym for Obama's Affordable Care Act. On the spending side, lawmakers were seeking a deal on a $1.1 trillion bill financing federal agencies next year. Agreement was close on the numbers, but flash points included GOP efforts to weaken Obama attempts to reduce air and water pollution and loosen travel restrictions to Cuba, and to ease laws regulating the financial industry. With the bill still incomplete, Congress planned to pass legislation averting a Saturday government shutdown, keeping agencies open through next Wednesday.