Revenue raising measures of one sort or another – such as initiatives aimed at clamping down on corporate tax shelters – could soon appear in the U.S. Senate as Democrats take control next week in the wake of Vermont Senator Jim Jeffords’ decision to leave the Republican party and become an Independent, reports Dow Jones Newswires.
That’s because incoming Senate Majority Leader Tom Daschle, D-SD, takes the view that there isn’t any room left in the budget for more net tax breaks as a result of the recent approval by Congress of a $1.35 trillion package of tax cuts spread over 10 years, says the news service.
“The budget doesn’t allow for any more tax cuts unless they are paid for,” Daschle said in a recent television appearance. “If we can pay for them, I’m more than happy to associate a good business package along with minimum wage,” he said, referring to plans by Senate Democrats to push a measure that would give low-income workers another $1.50 an hour, spread over two years.
Concessions for small business aren’t the only additional tax cuts Congress will likely be considering in coming months, says Dow Jones. A bunch of miscellaneous tax breaks – the so-called extenders – expire this year; incentives for energy conservation and production will be offered, and healthcare-related tax cuts will likely soon surface in connection with patients’ rights legislation that is at the top of Daschle’s priority list.
On Capitol Hill, paying for a new tax break means offsetting its cost by measures that raise money elsewhere and that’s hard to do without imposing higher taxes, or a new tax, on someone.
The Clinton administration always had a long list of “loophole closers” (most of them vigorously opposed by the affected groups and their friends in Congress) ready for use if needed. One of them – repeal of the installment method of accounting for accrual method taxpayers – blew up in former Treasury Secretary Lawrence Summers’s face when it was enacted to help offset the cost of other measures. The “loophole” in question turned out to be 80 years of standard business practices and Congress had to quickly reverse course and reinstate the provision, says Dow Jones.
Dow Jones says that this time around, it could fall to incoming Finance Committee Chairman Max Baucus, D-Mont., to identify any revenue- raisers Daschle and his allies may attempt to insist upon – not a pleasant task, especially since Baucus co-authored the Senate version of the $1.35 trillion tax cut bill.
Measures to close down corporate tax shelters – a topic that has fallen out of the news – could surface as one potential source of new revenues (on paper at least) because they arguably wouldn’t be considered a new or higher tax, says the Dow Jones report.
The Republican-controlled House of Representatives isn’t likely to take the position that offsets are needed to cover the cost of more tax breaks. Most Republicans consider the budget a “floor” rather than a ceiling in that area – as long as the Social Security surplus remains intact at any rate.
Moreover, says Dow Jones, the Bush administration appears unlikely to willingly accept any revenue-raising measures, but with the Senate in Democratic hands, it’s not impossible some measures could be the price the president might ultimately have to pay for something he wants.