Rep. Sander Levin (D-Mich.), the man who heads the tax-writing Ways and Means Committee, recently looked into his legislative crystal ball and issued some predictions about the still pending tax extenders.
Extenders, as all y'all know by now, are those ostensibly temporary tax breaks that seem to live in perpetuity thanks to continued, albeit often late or even after-expiration, approval by Congress.
A large group of such tax breaks died on Dec. 31, 2009. The House had managed last December to pass a measure keeping them on the books beyond 2009, but the Senate didn't act on the bill, H.R.
4213, until March.
And since both bodies had slightly different ideas about the extenders and, more importantly, how to pay for them, they have to hash things out before the tax breaks can be reinstated.
Now, as it looks like such reconciliation might be looming, we get the word from the Ways and Means Oracle about what to expect.Tick, tick, tick: Let's start with timing.
The goal, said Levin, is to complete work on extenders by the Memorial Day break. Levin said he plans to speak with Senate Finance Chairman Max Baucus (D-Mont.)
and Democratic leaders about timing of the bill's consideration either this week or next.
Memorial Day this year is May 30. That gives Representatives and Senators about a month.
Doable, but even if they indeed start working on a comprise soon, expect them to still push that end of May unofficial target.
Multi-year extenders? The other part of the timing equation is how long any extended breaks might live.
Occasionally, Congress passes these breaks for more than a year, typically in situations like we're dealing with now. That is, when lawmakers put things off into deeper into a tax year, they've been know to extend the tax credits and deductions beyond the rapidly passing year in which they're working into the next one, too.
That makes it a little easier on taxpayers (and their tax advisers), as well as relieves Congress from having to start the extenders process all over again almost immediately.
Levin says that's a possibility this time, too: "I wouldn't want to say that there will be nothing in here [the bill] that relates to beyond a year."
OK, kind of convoluted Capitol Hill syntax, but we get it. Some of the extenders could be approved retroactively for 2010 as well as for the upcoming 2011 tax year.
But Levin wouldn't go into details.
Payment problems: Levin's crystal ball also is a bit cloudy when it comes to how to pay for the extenders.
That's always an issue, since extenders are parceled out on a year-by-year basis in large part to allow for budget shenanigans manipulations considerations
Funding issues are even more frustrating this year, since health care reform absorbed many of the proposed ways to pay.Some in Washington have called for using part of any bank tax to pay for the extenders. Many in Congress want to keep such a tax separate from the financial reform debate now underway, but there's no apparent consensus on using any such revenue to offset the costs of temporary tax breaks.
Levin did mention that a plan to impose payroll taxes on some S corporation income is a possibility. Acknowledging that its members are in the crosshairs, the S Corporation Association of America (S-CORP) posted on its website Tuesday that it "would work constructively" with Capitol Hill on the issue, but that unless they are willing to "dramatically pare back" earlier proposals and "target only bad actors, it is going to be very difficult for business groups to support yet another tax increase on their members."
Carried interest tax changes also remain popular. This move would end the lower capital gains rate (15 percent) taxation of investment-related compensation and instead subject it to ordinary tax rates (currently topping out at 35 percent, but set to go higher in 2011).
The carried interest change is already part of the House extenders bill, but the Senate is not keen on the provision.
Levin, however, is fond of the change from capital gains to ordinary income tax rates and has introduced several such bills in the past, so he might use his new Ways and Means clout to muscle it through.
Future shock, anyone? So which of Levin's predictions will come true? Heck, I've turned in my Swami turban.
Although it looks like my prediction (hope) that the first-time homebuyer credit will be allowed to expire on Friday is correct, I so totally blew the estate tax continuation, as well as its early retroactive reinstatement.
I know when to cut my prognostication losses!
But I will tell you with full certainty that I'll keep my eye on these guys and gals and let you know what they decide as soon as they finally figure it out themselves!
- Bank tax to fund extenders?
- House OKs extending tax breaks
- Congressional tax wrap-up
- Tax break extenders on tap
Want to tell your friends about this blog post? Click the Tweet This or Digg This buttons below or use the Share This icon to spread the word via e-mail, Facebook and other popular applications. Thanks!