Senate Republicans Reach Initial Agreement Over Tax Cut Extensions

by Mike Godfrey, Tax-News.com, Washington

09 March 2005

Republican leaders in the United States Senate have agreed in principle to extend around $70 billion in major tax cuts which are set to expire by 2010, as part of the budget plan for the 2006 fiscal year, Senate Budget Committee Chairman Judd Gregg (R-N.H) revealed on Monday.

Among the tax provisions scheduled to expire in four years' time are several measures designed to provide relief for business and investment, including a tax credit for research and development expenses and tax cuts on capital gains and on dividends.

It has been estimated that an extension of the research credit would cost $27 billion, while prolonging capital gains and dividend tax relief would cost a further $32.5 billion by 2010. In addition, extending a provision allowing small businesses to continue writing off more of their capital purchases would cost another $13 billion.

The proposals to extend tax cuts which expire in 2010 have allowed lawmakers to postpone the politically difficult subject of extending other tax cuts, such as marginal income tax cuts and tax breaks for married couples, as these expire after 2010 and are outside of the 2006 budget’s timetable.

The 2006 budget plans are due to be discussed by the Senate Budget Committee today.

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