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Obama Threatens To Veto Tax Extenders Deal

by Mike Godfrey,, Washington

28 November 2014

Statements from US Treasury Secretary Jack Lew and White House Press Secretary Josh Earnest have indicated that the reported bipartisan deal being put together in Congress on an extension of the 'tax extenders' measures would not be supported by President Barack Obama.

The more than 50 provisions for individuals that expired at the end of 2013 include mortgage tax relief; the deduction for state and local sales taxes; and education tax deductions. There has also been talk of extending the provisions of the Child Tax Credit (CTC) and Earned Income Tax Credit (EITC), which improved their benefits for low-income households and are to expire at the end of 2016.

For businesses, the package of measures that are usually rolled over on an annual basis include increased expensing under Section 179; 50 percent bonus depreciation; the work opportunity tax credit; the credit for research and development (R&D) expenses; and tax breaks promoting renewable energy, such as the production tax credit that is relied upon by the wind industry.

It has been reported that the deal being put together by Republican and Democrat lawmakers for a renewal of the tax extenders during the current lame-duck congressional session could, for example, permanently renew selected business measures, the most expensive of which would be the R&D credit, at a total ten-year unfunded cost of over USD400bn, but would leave untouched the expiry date of the additional CTC and EITC provisions.

Lew said that such a deal would be "fiscally irresponsible," adding that "an extender package that makes permanent expiring business provisions without addressing tax credits for working families is the wrong approach. … Any deal on tax extenders must ensure that the economic benefits are broadly shared."

In a separate statement, Earnest stressed that the Administration "would not be supportive" if the reports that "some in Congress who want to provide [permanent] tax relief to businesses and to corporate insiders, but not ensuring that those benefits are shared by middle-class families," become reality.

That attitude was also supported by the House Of Representatives Ways and Means Committee Ranking Member, Sander Levin (D – Michigan), who called it "fiscally irresponsible to use expiring tax provisions to make permanent changes to our tax code at a cost of more than USD400bn. The President's veto message is very clear in the priorities it sets forth, and we should go back to the drawing board."

However, the current difficulty in reaching some kind of agreement before the end of 2014 harks back to the gap that has existed throughout this year between Republican and Democrat lawmakers on how to treat the tax extenders.

While Republicans have so far supported a permanent extension of those provisions (including the R&D tax credit) that they see as important to economic growth, Senate Democrats have been looking to renew virtually all of the tax extenders, but for only two years.

TAGS: individuals | tax | business | law | corporation tax | tax credits | ministry of finance | United States | tax breaks | individual income tax | research and development | Tax

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