Republican leaders say House Democrats are asking for too much in return for movement on a bill to renew 30-plus tax breaks known collectively as extenders.
Senate Finance Chairman Charles E. Grassley said his office estimates one version of the House Democrats’ request at $710 billion for a package that would make both the tax extenders and a proposal by House Ways and Means Chairman Richard E. Neal, D-Mass., permanent.
Neal’s bill, which Ways and Means approved in June, would make the Child Tax Credit fully refundable and expand it to younger children, boost the Earned Income Tax Credit for single filers and expand the availability of child care tax credits, but only for two years.
“It was based on the premise that they want permanent law on some refundable credits, because we want permanent law on tax extenders,” Grassley, R-Iowa, said. “But we’ve always said that’s just comparing apples with oranges.”
The Senate Finance chairman said extenders ought to have enough bipartisan support to move on their own, without pairing them up with other House Democratic priorities.
“In the past, it’s been very bipartisan and most of these tax credits have more Democrat support than they have Republican support,” said Grassley, noting the extenders have been “kind of pro-forma extended” in the past.
The extenders that lawmakers from both parties want to renew include a $1 per gallon tax credit for biodiesel important to producers in Grassley’s home state of Iowa and across the Midwest and elsewhere where the cleaner-burning motor fuel is refined and sold. Other popular breaks, which have either already lapsed or are set to at the end of 2019, include tax credits for employer-paid family leave, the exclusion of canceled mortgage debt from taxable income, and more generous deductions for costly medical expenses.
Those provisions and many others would be extended through 2020 under a separate extenders bill Neal’s committee approved in June, which also contained disaster tax relief provisions that could gain new traction with the latest outbreak of California wildfires.
Deal or no deal?
The general framework of a deal could also include technical corrections to the 2017 tax law, such as fixing a flaw in the law’s depreciation rules that exclude retailers’ storefront improvements. But with the talks appearing to flounder, it’s unclear when a tax bill could move in the current environment, though Grassley has cited the Nov. 21 expiration of the current stopgap government funding law as one possible forcing mechanism.
“We have a deal, then we don’t have a deal. What’re you gonna do?” asked Sen. Pat Roberts, R-Kan., a senior Finance panel member.
A Ways and Means Democratic aide said a tax deal doesn’t necessarily need to make any provisions permanent, suggesting that costs can be pared down by keeping the provisions temporary, like in the bills the panel approved in June. “If Congress is to extend any tax cuts that largely flow to business interests, Democrats have said that there must also be some sort of temporary expansion of refundable tax credits,” the aide said.
Grassley has previously said he is open to boosting the EITC for single filers, who currently get a far smaller benefit from the credit than households with children.
Grassley’s comments are similar to views expressed last week by House Ways and Means ranking member Kevin Brady, R-Texas, who said Democrats were seeking $1 trillion in new spending in return for tax extenders. Brady didn’t specify what was included in his estimate.
“I think it will be difficult to reach a year-end conclusion because the demands by some of the Democrats for up to $1 trillion in new spending in return for the tax extenders is just not real world,” Brady told reporters last week. “So when they’re ready to come down to Earth we’d like to have a constructive discussion.”
The Joint Committee on Taxation said Neal’s refundable tax credit provisions would cost $100 billion over two years. If those changes were made permanent, the cost would be $392 billion over 10 years, JCT’s Chief of Staff Thomas Barthold told Brady at the June markup.
But those estimates were made before Neal added an expensive feature to his bill: a two-year $3,000 tax credit for children under 4 years old that would cost $29 billion.
At the time, the nonpartisan Committee for a Responsible Federal Budget said the earlier versions of Neal’s bills combined would cost $710 billion over a decade, including interest payments on the added debt. The group later increased its cost estimate to $900 billion after the child credit expansion was added. Those figures are in line with the numbers cited by Grassley and Brady.
Despite differences over costs and offsets, Grassley sounded hopeful lawmakers could pass a tax bill this year.
“I will say this, that Neal I think is very sincere about wanting to get extenders,” Grassley said. “But what it takes to get them, I don’t know.”