Life and Death to Taxes
Finance Panel Tackles Everything
While health care reform is a lofty goal for most lawmakers, tackling the issue is merely a warm-up for Senate Finance Chairman Max Baucus (D-Mont.), who will move on multiple fronts once health reform is approved — assuming it is.
Baucus hopes to advance his health bill to President Barack Obama by August, and he then plans to focus on numerous issues ranging from routine tax bills to revamping the energy sector.
It’s all part of the committee’s broad and meaty portfolio. Health care is sure to be the most controversial and time-consuming issue the committee addresses this year, but energy may not be far behind.
“In terms of looking at renewable energies and energy reform, the Finance Committee will play a role there,— said Sen. Blanche Lincoln (D-Ark.), a member of the panel. “I think that will be a big part of what we’ll do after heath care reform because that is probably the timeline that energy will start coming up.—
The Finance panel is charged with locating revenue for nearly all Congressional initiatives. Lincoln predicts Members will look within the energy industry to find ways to pay for new energy programs.
“I think one of the things that the committee has tried to stress is we keep it relative to the things we’re dealing with,— she said, adding, “Where we have outdated incentives or industries that are mature, who no longer need much incentifying, we can balance out some of that as we look toward energy reform and renewable energy.—
Within the budget Obama presented to Congress are options for taxing the oil industry, and some are quite lucrative. Creating tax incentives for the production of clean, renewable energy is the No. 1 priority for Sen. Jeff Bingaman (D-N.M.), chairman of the Finance Subcommittee on Energy, Natural Resources and Infrastructure. He doubles as chairman of the Energy and Natural Resources Committee, which is also examining energy reform, and he’s poised to play a huge role in whatever gets passed this year.
For taxes that affect individuals and non-energy businesses, Baucus plans to move a routine tax bill commonly known as “extenders— that revives tax breaks on the verge of expiration.
“We’re going to do an extenders bill by the end of the year,— said Cathy Koch, Baucus’ tax chief on the committee. “We always do.—
Undertaking extenders this year is welcome news to lobbyists who feared Congress might forgo the issue after lawmakers used the $789 billion economic recovery bill to shield middle-income wage earners from the alternative minimum tax for 2009.
Normally, extending AMT relief is a catalyst for moving extenders since inaction on the tax would force millions of American to pay more in taxes than necessary. But with a temporary AMT fix in place, and the bulk of other extenders not expiring until 2010, many tax experts thought lawmakers might postpone debate on the issue until next year. The delay would have created tax-planning headaches for businesses that base decisions on certain provisions remaining a part of the tax code.
“We’re going to have to give some certainty to people,— Lincoln said. “If we don’t give assurances to some of these businesses and industries that they’re going to be able to have predictability, then we’re not helping the economy; we’re hindering it.—
Enacting an extenders bill requires reciprocation in the House. A spokesman for Ways and Means Chairman Charlie Rangel (D-N.Y.) would not say whether the committee would take up the issue this year.
In the Finance panel, Lincoln also expects Baucus to take on tax reform this fall. The issue could come up in the context of legislation the chairman introduced in March that freezes the estate tax, makes permanent marginal rate cuts enacted in 2001, and tweaks investment breaks signed into law in 2003.
“The chairman has said that he will work to move his proposal this year,— a Baucus aide said.
Baucus’ counterpart, Finance ranking member Chuck Grassley (R-Iowa), predicts only one major tax bill will emerge from the committee this year and that it will be a freeze on the estate tax. Overall tax reform is not on his radar.
“We’re going to have one big one, and it’s going to be around the estate tax,— Grassley said.
Baucus is also shopping a proposal that cracks down on offshore tax evasion, which could help pay for some of his broader initiatives. The chairman has already hosted a hearing on the subject and may look to move a bill in the coming months.
“The chairman recently announced a preliminary draft of legislation to address offshore noncompliance by giving the IRS better tools — like additional reporting requirements — to detect fraud before it happens,— the Baucus aide said. “Once stakeholders are able to provide sufficient feedback on the proposal we will consider next steps, including any possible additional hearings.—
Tangential to Baucus’ evasion bill is an item in Obama’s budget ending certain tax deferrals for overseas businesses that, in effect, allow them to delay payment of taxes on some income. The president’s number cruncher expects the plan to generate $210 billion in additional tax revenue for the government over the next 10 years.
Characterizing deferral as evasion will be a hard sell in Congress, and even some Democrats argue that some deferral is vital for economic growth. Grassley is looking to repeal deferrals that don’t meet the “economic substance— standard, a benchmark used for determining if the delay in paying tax earned overseas is legitimate or merely a form of tax evasion.
“We’re going to look at everything that doesn’t have economic substance and close every loophole that doesn’t have economic substance,— Grassley said.