Tax Cut Extensions Possible
We reported earlier that Senate Finance Committee Chairman Charles Grassley (R-IA) wanted to delay until September consideration of extending the "middle-class" tax cuts -- marriage penalty, expansion of the 10% income tax bracket, and the $1000 child tax credit -- that will expire on December 31. However, the Bureau of National Affairs (BNA) reported July 12 that House and Senate leaders plan to consider the cuts late this week.
Grassley reasoned that the same Senators, who so strongly fought against a budget resolution requiring offsets on entitlements, but not on tax cuts, may insist that the costs of extending any tax cuts should be offset to avoid worsening the deficit. However, after both parties' conventions are over in September, and as the December 31 deadline gets closer, that insistence might fade.
The House has already passed bills making permanent the three middle-class tax cuts and extending the Alternative Minimum Tax (AMT) breaks for one more year. Those bills have no offset provisions. President Bush, of course, strongly supports extension of all the tax cuts and prefers earlier passage.
BNA also reported this morning that House and Senate Majority leaders are trying to write a conference report on the House-passed child tax credit refund bill (H.R. 1308), and use it as the vehicle for extension of at least those three expiring tax cuts. It is not known whether the AMT (or other tax cuts) will be part of that package, especially since fixing the AMT is very expensive compared to the cost of extensions of the other tax cuts. With apparent reluctance, Grassley has agreed to earlier consideration, although high support for the extension of the three tax cuts in the Senate is mixed with concerns about increasing the deficit.