Don't Mess With Taxes

Same song, 837th verse: Congressional action on extenders tax legislation stalled.

Today's expected House vote on renewing some popular individual and business tax breaks -- and implementing new taxes to pay for the extended tax cuts -- is on hold.

The latest snag in the passage of H.R. 4213, the American Jobs and Closing Tax Loopholes Act of 2010 is its proposal to change taxation of carried interest payments. Carried interest income would be treated as 50 percent ordinary income and 50 percent capital gains through 2012; in 2013, it would be taxed as 75 percent ordinary income and 25 percent capital gains.

Since the chairmen of the House Ways and Means and Senate Finance Committees agreed on a reauthorization package last week, a group of Democratic senators has been trying to exempt venture capitalists from the tax increase on carried interest.

In addition, fiscal conservatives from both parties who are concerned about the bill's cost have slowed the House vote timetable.

To pay for one more year of retroactive extensions of expired tax cuts would cost $32.5 billion over 10 years, according to the Joint Committee on Taxation.

H.R. 4213 actually would raise more tax money than it would lose, primarily through the carried interest changes, new payroll taxes on some S corporation income, higher excise taxes on oil companies and several changes to foreign income taxation.

But, says the Congressional Budget Office, the measure still could add $134 billion to the deficit thanks to spending provisions that aren't required to be offset under "pay-go" budget rules.

The tax package also includes a $7.9 billion package of infrastructure incentives, including a modified extension of the Build America Bonds program., as well as provisions from the House jobs bill passed by that body back in March.

So the wait continues.

Related posts:

• Tax extenders vote on Tuesday?
• Agreement reached on tax extenders
• Ways to pay for extenders grows
• Extenders outlook from W&M chair
• Bank tax to fund extenders?
• House OKs extending tax breaks
• Congressional tax wrap-up
• Tax break extenders on tap

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