October 30, 2007 Rangel Introduces AMT Repeal, Tax Reform
Note: Federal Government agencies are currently operating under a continuing resolution (H.J. Res. 52) allowing Federal programs, projects, and activities to continue operating at FY 2007 spending levels through November 16. This Week:
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RANGEL SAYS 2007 ONE-YEAR AMT “PATCH” SHOULD BE PAID FOR; Last Thursday, House Ways and Means Committee Chairman Charles Rangel (D-NY) introduced H.R. 3970, a $1.3 trillion tax reform package including a full repeal of the Alternative Minimum Tax. (Bill Summary) However, Rangel acknowledges that for 2007, action is likely to be limited to a one-year AMT patch (plus extension of various expiring tax provisions such as the R&E tax credit and deduction for sales tax). To PAYGO, or not to PAYGO: An immediate issue is how to pay for the 2007 patch and tax extenders in order to comply with Congress' PAYGO rules (which require that tax cuts be paid for with offsetting revenue raisers or entitlement spending cuts). A one-year AMT patch would cost $50 billion while the extenders are estimated at $21 billion. (The Senate Finance Committee is also considering tax extenders at an estimated cost of $15-$20 billion.) Ways & Means Ranking Republican Jim McCrery (R-LA) said Republicans oppose PAYGO and want to enact a patch and extenders without offsets, but Rangel reiterated his intention yesterday on PBS' NewsHour to abide by PAYGO, one of the principal reforms adopted by House Democrats when they became the majority party. (Rangel Release) (Context: Because AMT relief expired at the end of 2006, any extension of AMT relief for 2007 is considered under congressional budget rules to be a new tax cut.) [Context on AMT: The AMT was enacted in 1969 to preclude wealthy individuals from escaping all tax liability due to tax loopholes. It operates as an alternative calculation of income tax liability which cancels out various deductions, exclusions, and tax preferences. Taxpayers are required to pay the higher of AMT tax liability and regular income tax liability. However, upper-middle and middle-income taxpayers are increasingly finding themselves subject to the AMT—for two reasons. First, while the regular income tax is indexed for inflation, the AMT is not. Second , recent income tax rate reductions have narrowed the differences between regular and AMT tax liabilities. The Treasury Department now projects that 25 million taxpayers will be subject to the AMT in 2007 without repeal or enactment of a one-year patch. (Treasury Release)] Highlights of Rangel Tax Package: Tax Cuts Tax Increases to Pay for AMT Repeal and other Tax Cuts Republicans have strongly criticized the tax increases included to pay for the Rangel tax package. However, the Joint Committee on Taxation estimates that while 1.7 million taxpayers would see a net increase in taxes, nearly 92 million taxpayers would receive a net tax cut. (JCT Estimate) ADMINISTRATION SAYS REVISED SCHIP BILL DOESN'T GO FAR ENOUGH Last Thursday, October 25, the House a revised SCHIP bill (H.R. 3963) by a vote of 265-142, still 7 votes short of a veto-proof margin. The bill comes just one week after the House failed to override the President's veto of a House-Senate compromise bill. The revised bill includes several revisions aimed at attracting additional Republican votes:
The administration remains opposed to the SCHIP legislation. (October 25 Administration statement) However, key Republican Senators Charles Grassley (R-IA) and Orrin Hatch (R-UT) released a statement praising the revised bill and calling it an improvement over the original House- and Senate-passed bill. The President's proposal to cap SCHIP assistance at 200 percent of the Federal Poverty Level is much stricter than current law. 19 States-- with Administration approval-- currently cover children in families earning more than 200 percent above the FPL (ranging from West VA at 220 percent to New Jersey at 350 percent of FPL). The rationale for the flexibility of current law is that in New Jersey , for example, a family of four with two working parents earning 300 percent of the poverty level ($61,950) is unlikely to find affordable health insurance. Consequently, supporters of the bill, both Democratic and Republican, argue that the President's proposed reauthorization would reduce the number of low-income children currently covered by SCHIP. [Context: SCHIP was established in 1997 and provides health coverage to children in families whose incomes are low, but somewhat higher than Medicaid's very tight income eligibility limits. The program operates similar to Medicaid with Federal reimbursements for a percentage of State expenditures to provide health coverage for eligible children.] APPROPRIATIONS UPDATE Congressional Democrats and the President are currently locked in a face-off over appropriations levels, with Congress' Budget Resolution calling for $22 billion more in non-defense discretionary spending than the President's FY 2008 Budget request. The President has threatened to veto 9 of 12 appropriations bills. Democratic congressional leaders are debating which bills to send to the President first. One possibility is linking the Labor-HHS-Education bill with Defense and/or MilCon-VA. In a press release, the American Legion says that Senate Majority Leader Reid promised to send the bill to the President before Veterans' Day. Following vetoes and political posturing, negotiations will likely begin on an omnibus appropriations package-- negotiations that could well last into December. Status of pending appropriations: Agriculture/HR 3161: House bill $982 million over President's request; Senate-reported bill $874 million over President's request; White House threatened a veto on July 31. House Summary Senate Summary [Conference Issues: House bill includes provision allowing individuals and pharmacies to import prescription drugs from Canada and other countries.] Commerce-Justice-Science/HR 3093: House bill $2.31 billion over President's request; Senate bill $4.2 billion over President's request; White House has threatened to veto the House and Senate bills. House Summary Senate Summary [Conference Issues: Senate bill provides additional $350 million for Commerce and nearly $400 million more for Justice. On the Floor, a Biden amendment provided an additional $110 million for the Community Oriented Policing Services (COPS) program. (Biden Release) Senate also passed a Mikulski Floor amendment to include an additional $1 billion to reimburse NASA for costs from the Columbia crash that led to program cuts. (Mikulski Release)]Defense/HR 3222: House bill $3.29 billion under President's request; Senate-reported base bill (excluding emergency border security) $3.58 billion under President's request. No veto threat. Like MilCon-VA, Congressional Democrats are likely to hold off on sending the Defense bill to the President, instead using it as vehicle to negotiate other bills' passage. House Summary Senate Summary [Conference Issues: House bill includes language restricting torture and permanent bases in Iraq, provides $2.8 billion more for transport ship and Stryker vehicles, and would appropriate additional $270 million for satellites and GPS programs. Senate bill includes nearly $3.8 billion in emergency spending for border security, and provides additional $500 million for military health care programs.] Energy-Water/HR 2641: House bill $1.13 billion over President's request; Senate-reported bill $800 million over President's request; White House threatened a veto on June 13. House Summary Senate Summary [Conference Issues: Senate bill provides additional $760 million for National Nuclear Security Administration. House bill provides $200 million more for renewable energy programs.] Financial Services/HR 2829: House bill $244 million under President's request; Senate-reported bill $122 million over President's request; White House threatened a veto on June 26 because of provisions that would “weaken current [trade] restrictions against Cuba .” House Summary Senate Summary Homeland Security/HR 2638: House bill $2.06 billion over President's request; Senate bill $5.25 billion over President's request; White House has threatened to veto the House and Senate bills. House Summary Senate Summary [Conference Issues: House bill provides over $200 million more for FEMA. Senate added $3 billion of emergency funding for border security.] Interior-Environment/HR 2643: House bill $1.95 billion over President's request; Senate-reported bill $1.498 billion over President's request; White House threatened a veto on June 25. House Summary Senate Summary [Conference Issues: House bill appropriates $300 million more for the EPA, mostly in the form of state assistance grants.] Labor-HHS-Education/HR 3043: Last Tuesday, October 23, the Senate passed the Labor-HHS-Education Appropriations (H.R. 3043) by a vote of 75-19. The bill would provide $149.9 billion, which is $9 billion more than the President's request. House bill $10.83 billion over President's request; White House has threatened to veto the House and Senate bills. House and Senate begin conferencing this week. House Summary Senate Summary [Conference Issues: The House bill includes additional $500 million for low-income home energy assistance (LIHEAP) and $500 million more for grants to low income schools. The Senate would provide an additional $250 million for NIH. Senate Floor amendments include additional $150 million for Social Security.] Legislative Branch/HR 2771: House bill $3.1 billion; Senate-reported bill $2.8 billion; President requested $4.33 billion (combined), White House has not threatened a veto. [Context: The House and Senate do not consider the spending of the other chamber until conference.] House Summary Senate Summary MilCon-VA/HR 2642: House bill $4 billion over President's request; Senate bill $4 billion over President's request; White House has not threatened a veto but insists on offsets in other spending bills. House Summary Senate Summary [Conference Issues: The House bill would provide $196 million more than the Senate for medical programs; the Senate bill would provide $177 million more than the House for base construction and closings. The Senate bill also includes $100 million in emergency funds for security at 2008 political conventions.] State-Foreign Ops/HR 2764: House bill $700 million under President's request; Senate bill $720 million under President's request; White House has threatened to veto the House and Senate bills. [Context: Despite coming in under the President's request, both bills face veto threats because of language that would overturn a policy barring U.S. funding for any international organization that performs abortions overseas.] House Summary Senate Summary [Conference Issues: House bill provides $600 million more than the Senate for the Millennium Challenge Corporation, which provides competitive grants to nations engaged in democratic reforms.] Transportation-HUD/HR 3074: House bill $2.77 billion over President's request; Senate bill $3.1 billion over President's request; White House has threatened to veto the House and Senate bills. House Summary Senate Summary [Conference Issues: The House would provide $228 million more than the Senate for Community Development Block Grants. The Senate bill includes an additional $1 billion for bridge repair and maintenance.] FARM BILL PASSES SENATE AGRICULTURE COMMITTEE, CONTENTIOUS FLOOR DEBATE AHEAD Last Thursday, the Senate Agriculture Committee unanimously approved the Farm Bill in a voice vote. The reauthorization bill, expected to cost around $238 billion, follows months of negotiations by Agriculture Chairman Tom Harkin (D-IA), Finance Chairman Max Baucus (D-MT), Budget Chairman Kent Conrad (D-ND), and Agriculture Ranking Member Saxby Chambliss (R-GA) who supported Conrad's efforts to maintain current subsidies. Although garnering unanimous support, the committee avoided many of the bill's controversial provisions, leaving them to be addressed when the bill reaches the floor. (Harkin Release) Most notably, the bill is expected to face opposition for $5 billion that would go towards a disaster relief fund. The fund was a key provision in S. 2242, a bill approved earlier by the Senate Finance committee. S. 2242, an agriculture tax package, includes $5.1 billion for the disaster relief fund, $7.5 billion for conservation provisions and another $2 billion for energy tax credits and incentives, totaling to nearly $16 billion. The package provides several different funding sources, including tariff revenues and codifying the “economic substance doctrine,” relating to business tax shelters. (Baucus Release) Another possibly contentious issue is Chairman Harkin's Average Crop Revenue (ACR) program, an optional program that would tie counter-cyclical farmer relief payments to state crop revenues instead of national revenues. The new program is expected to save $3 to $3.5 billion over 5 years and would allow farmers to opt for the crop revenue-based subsidies or continue with the existing system. The Senate is expected to begin consideration of the Farm Bill next week. [Context: The "Farm Bill," renewed every 5 to 6 years, governs the key aspects of Federal farm policy. Many provisions of the current Farm Bill, enacted in 2002, expired this year. The 2002 bill covers a wide range of programs. Those with the greatest budget impact are (1) Food Stamps; (2) Commodity Support programs (government subsidies to producers of certain farm commodities--primarily corn, cotton, wheat, rice, and soybeans--intended to stabilize farm income); (3) Agricultural Conservation programs (payments and incentives addressing environmental concerns, soil erosion and water supplies);and (4) Export promotion programs.] NEW BUDGET DOCS CBO: Testimony on Public Spending on Surface Transportation Infrastructure GAO: Federal Electricity Subsidies: Information on Research Funding, Tax Expenditures, and Other Activities That Support Electricity ProductionGAO: 2010 Census: Population Measures Are Important for Federal Funding Allocations |
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| Charles S. Konigsberg, President | (202) 587-2984 (ph) | (202) 587-2983 (fax) | ckonigsberg@federalbudgetgroup.com | |