Conference committee
reboots negotiations on payroll tax relief
Negotiations over an extension of the
current-law 2 percent payroll tax holiday through
the end of the year kicked off on January 24 when
the 20-member House-Senate conference committee
gathered for its first meeting. Opening statements
offered by each member demonstrated broad agreement
on extending through 2012 payroll tax relief,
federal unemployment insurance (UI) benefits, and
provisions to prevent a scheduled cut in payments to
Medicare providers (the so-called “doc fix”) – all
of which are scheduled to expire after February 29.
At the same time, however, Democrats and Republicans
appeared far apart on how to pay for the roughly
$160 billion package and whether other provisions
should
also be included in the conference report.
While Democratic conferees generally spoke in
favor of extending UI benefits without offsetting
the cost, they indicated that upper-income taxpayers
or corporations should bear the burden if
Republicans insist upon an offset. Specifically,
many Democrats said this could be accomplished by
imposing a surtax on millionaires, taxing carried
interests as ordinary income, or repealing oil and
gas tax incentives. Republicans, meanwhile,
generally opposed leaving any provision unoffset or
using
tax increases as pay-fors.
Many
Republicans also argued in favor of including
provisions to ensure the Keystone XL oil pipeline
moves forward and to relax Environmental Protection
Agency regulations on industrial boilers. And for
his part, Senate Finance Committee member Ben
Cardin, D-Md., called on the committee to extend
certain renewable energy tax incentives.
But
conference committee Chairman Dave Camp, R-Mich.,
who also chairs the House Ways and Means Committee,
suggested that provisions outside of payroll tax
relief, UI benefits, and the ‘doc fix’ likely will
be forced to take a back seat in negotiations.
“I think we need to have a stricter scope of
conference. We need to decide on what our
responsibilities are before we open it up to more
things,” Camp said after the meeting.
Conferees are scheduled to meet again on February 1
to examine the policy details of payroll tax relief,
UI benefits, and the doc fix.
Federal debt
ceiling to increase
In other news, the Senate
on January 26 rejected, by a vote of 44-52, a motion
to proceed to a disapproval resolution related to
President Obama’s January 12 request to increase the
debt limit by $1.2 trillion pursuant to the Budget
Control Act of 2011. The Senate’s rejection paves
the way for the debt limit to rise to $16.4 trillion
on January 27. The Republican controlled House of
Representatives had previously approved the
resolution along party lines on January 18.
This closes out the debt limit increase process put
in place by the Budget Control Act. The next
required increase – which is presently expected in
late 2012 or early 2013 – will therefore require
affirmative votes in both chambers.
Congress
approves short-term extension of FAA funding
House lawmakers on January 24 cleared by voice vote
legislation (H.R. 3800) that extends excise taxes at
their current levels, through February 17, to
finance Federal Aviation Administration (FAA)
programs. The Senate approved the House measure by
voice vote on January 26. The temporary fix allows
negotiators time to find common ground on a
longer-term reauthorization (reportedly four years).
— Joel Deuth
Tax Policy Group
Deloitte Tax
LLP
