House Republicans Seek To Move On Tax Cut Extensions

by Mike Godfrey, Tax News.com, Wasington

10 September 2004

Senior House Republicans are reportedly confident that three tax cuts due to expire at the end of 2004 will be extended, although views amongst lawmakers remain divided over how long to extend the cuts for.

At stake are three tax breaks passed under the Bush Presidency, including the $1,000 child tax credit, a tax break offsetting the ‘marriage penalty’ and the 10% lower tax bracket.

Failure to extend these measures beyond the end of the year will mean a reduction in the child tax credit to $700, loss of some of the marriage penalty breaks and a scaling back of the 10% bracket that would mean virtually all taxpayers will see an effective increase in their taxes next year.

House Majority Leader, Senator Tom DeLay (R – Tex) told reporters he was confident an agreement on the measures will be arrived at in the next fortnight.

"We are going to make sure the economy is protected from these tax hikes," said DeLay.

However, whilst the Chairman of the House Ways and Means Committee, Bill Thomas (R – Calif), agreed that House and Senate negotiators may reach a consensus within the next two weeks, he pointed out that significant questions remain unanswered.

Among these is the question of whether to extend the tax cuts for five years, as the Bush administration hopes, or for two years. Also, the Senate wishes to close certain loopholes to offset the cost of the tax cuts, whilst the House has made no such provision.

"We haven't completely determined what the product will look like," Thomas admitted to reporters.

Complicating matters further, lawmakers have little time in which to negotiate a solution given the proximity of the Presidential elections and the presence of several important pieces of legislation also awaiting the attention of Congress, which will go into recess once again in early October as members hit the campaign war path.

One option being examined is the tying in of the individual tax cut legislation with the corporate tax bill designed to end EU-imposed tariffs on US exports, an idea supported by Senate Finance Committee Chairman Chuck Grassley (R - Iowa).

Either way, there is a distinct possibility that both measures may ultimately have to be dealt with during a special session after November’s election - an eventuality Thomas is keen to avoid.

“If you spend all your time figuring out what you are going to do in a lame duck (session) then you have used up all of the time you could have been working on during the regular session to get something done," he noted.

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