Tax News

CCH (cch.taxgroup.com) reports:

  By a vote of 74 to 25, the Senate on October 1 overwhelmingly approved a multi-billion dollar financial rescue package (HR 1424) consisting of the Emergency Economic Stabilization Bill of 2008, Senate-passed tax extenders and an increase in federal insurance of bank deposits to $250,000. However, House Democrats' resistance to revenue offsets could lead to defeat of the revised plan. The House defeated a previous version of the rescue package by a vote of 228 to 205 on September 29 (TAXDAY, 2008/09/30, C.1).

  President Bush, in a written statement, applauded passage of the rescue package and said the Senate amendments should help to win bipartisan support in the House. Bush said the bill will provide "financial security for all Americans," noting it will help those who need to borrow money to purchase a car or to pay for college education. The $700 billion measure also is designed to assist state and local governments that rely on the credit markets to fund basic services, the president said.

  House Republicans prefer the Senate tax package, which is only partially offset, to the one offered by House Ways and Means Committee Chairman Charles B. Rangel, D-N.Y. His proposal calls for offsets for all but disaster tax relief and a one-year patch for the alternative minimum tax (AMT). Rangel charged that Senate leadership's decision to add their extenders package to the rescue bill was an "unprecedented gamble" that would most likely lead to failure in the House. House Majority Leader Steny L. Hoyer, D-Md., said that House leadership on both sides of the aisle would talk to members and, if there is bipartisan, majority support for the Senate package, they would most likely vote on the measure on October 3. If not, the House might vote over the weekend, he said.

  The Senate strategy for a revised rescue bill included an increase in FDIC insurance for bank account deposits from $100,000 to $250,000 plus the entire text of HR 6049, as amended by the Senate on September 23 (TAXDAY, 2008/09/24, C.1), including clean energy tax incentives, AMT relief, extensions of expiring business and family tax cuts, disaster relief, mental health parity and other provisions. The combined cost for all measures, energy, AMT, extenders and other provisions, is $150.496 billion, and the offsets in the package total $43.504 billion.

  Energy provisions are completely offset while extenders and other provisions are partially offset. The $64.1 billion cost of the AMT fix is not offset. Both the House and Senate have previously passed AMT relief without offsets in 2008.

  Senate Finance Committee Chairman Max Baucus, D-Mont., defended the addition of the tax legislation to the rescue plan, saying it would "ensure that regular working Americans get the financial help they need in this time of crisis." Senate Majority Leader Harry Reid, D-Nev., expressed optimism that the Senate's revised rescue plan, which was offered as a substitute amendment to a House-passed mental health parity bill (HR 1424), would ultimately garner the full support of all parties involved in the negotiations. "We are all committed to keeping the progress of the rescue package moving forward. I am hopeful and confident that all sides, the House, the Senate and the White House, will continue working together toward that goal," said Reid.

House Reaction to Senate Package

  Prior to the vote, Hoyer and Rangel criticized the Senate's attempt to pass the tax extenders bill by adding it to the economic bailout measure. The legislative strategy, while possibly gaining GOP votes in the House, will likely run afoul of the group of 49 fiscally conservative Democrats known as the Blue Dogs. That group has maintained that the House's pay-as-you-go budget rules require that tax cuts be offset by revenue increases or spending cuts. Hoyer told reporters that the decision to add extenders, AMT and energy tax provisions was controversial and could result in lower Democratic support.

  Rangel was blunter in his criticism of the Senate action. "Apparently, in the Senate, they just decide what can get 60 votes and insist the House follow suit," he said. "There is something wrong with this, not just for this Congress, but for those to follow." Rangel said House Democrats support the tax incentives, but do not want to increase the federal budget deficit. He hinted that the measure should be sweetened to win Democratic votes in the House by extending unemployment insurance benefits, food stamps and help for families facing higher fuel costs this winter.

  By Jeff Carlson, Stephen K. Cooper and Paula Cruickshank, CCH News Staff

Emergency Economic Stabilization Act of 2008, Senate Amendment in the Nature of a Substitute,
HR 1424

JCT Estimated Revenue Effects of the Tax Provisions Contained in an Amendment in the Nature of a Substitute to HR 1424, Scheduled for Consideration on the Senate Floor on October 1, 2008, JCX-78-08

SFC Staff Summary: Tax Proposals in Troubled Asset Relief Program (TARP)

SFC Press Release: Baucus Comments on Next Steps on Legislation Containing Energy Tax Incentives, AMT Relief, Extensions of Expiring Tax Cuts

House Ways and Means Committee Release: Rangel Statement on Senate Financial Rescue Bill

SAP on Senate Amendments to HR 1424, Emergency Economic Stabilization Act of 2008, Energy Improvement and Extension Act of 2008, and Tax Extenders and Alternative Minimum Tax Relief Act of 2008