Hopes Dim for Quick Action on Extenders as Focus Shifts to Payroll Tax
By Brett Ferguson
Publication Date: 01/05/2012
Congressional leaders in both parties have said they intend to work on passage of the annual tax extenders package early in 2012, but analysts said the odds of that happening have plunged now that top tax writers are focusing on a full-year extension of the payroll tax cut.
House Ways and Means Committee Chairman Dave Camp (R-Mich.) and Senate Finance Committee Chairman Max Baucus (D-Mont.) are playing key roles in the payroll tax cut conference committee negotiations and face a Feb. 29 deadline for producing an agreement to keep the 2 percentage point tax cut from expiring, leaving them with little time to focus on other issues at the start of the year.
The roughly $35 billion tax extenders package includes popular provisions such as the research and development tax credit, the state and local tax deduction, and an above-the-line tax deduction for teachers using their own money to purchase school supplies. While those provisions have a lot of support in Congress, finding a way to pay for the bill could be every bit as difficult as the payroll tax discussions have been, analysts said.
“For the House, it's already using the low-hanging fruit to pay for the payroll tax bill, so I don't know where they are going to find the money to pay for extenders,” said Howard Gleckman, a tax specialist at the Tax Policy Center. “ ‘Something will turn up’ is the sentiment when they are trying to find offsets for extenders, but they really never got close to a consensus on payrolls and they are not close on this.”
The issue is especially problematic this year because lawmakers doubt they will get much serious legislation done as the presidential election nears.
Few Bills Seen Moving After First Quarter
House Budget Committee Chairman Paul Ryan (R-Wis.) said in December—before a conference committee on the payroll tax was formed—that the extenders bill was expected to be dealt with in the first quarter of 2012. “After that, I don't see a lot,” Ryan told BNA.
Ryan acknowledged there is a view that Congress will likely be seen as wasting all of 2012 by not getting more legislation done and blamed President Obama for not working with House Republicans enough to find a compromise.
Gleckman said he sees only two possible scenarios for getting the tax extenders legislation done in 2012: add it to the payroll tax cut extension legislation in February or wait until the end of the year when Congress needs to deal with the expiration of the 2001 and 2003 tax cuts.
“I don't see any other way if they don't do it between those times,” Gleckman said, adding that most of the bill's provisions can be made retroactive to the start of 2012 without affecting a lot of taxpayers because they will not be filing their taxes until the spring of 2013.
The extenders package has not typically been paid for in prior congresses, but it would be tough to justify not paying for it if Congress is going to be paying for the payroll tax cut extension, he said. As a result, adding the extenders package to the payroll tax bill “is not as clean or simple as folks want to think.”
Tax Legislation Update
Learn more about which tax provisions are expiring:
2010-2011 Expiring Federal Tax Provisions »
The complete text of this article can be found in the BNA Daily Tax Report, January 5, 2012. For comprehensive coverage of taxation, pension, budget, and accounting issues, sign up for a free trial or subscribe to the BNA Daily Tax Report today. Learn more »
© 2012, The Bureau of National Affairs, Inc.