Situation Volatile but Reasonable Chance for Tax Extenders this Year

The elections are over and many otherwise interested Americans have turned (at least one eye) temporarily away from politics. I understand the sentiment.  Forcing yourself to follow Congress right now is like dragging one of those civil-war era canon balls with a chain around your ankle.
Nevertheless, important issues are being addressed, including the Work Opportunity Tax Credit and numerous other tax extenders.
The following Situation Report from Paul Suplizio, President of the WOTC Coalition is published here with permission (bold and underlining emphasis is from the original).
From: Paul Suplizio
Sent: Tuesday, November 27, 2012 12:51 AM
Subject: Situation Report: Geithner, Ryan Leading Fiscal Cliff Talks
November 26, 2012
The President has appointed Treasury Secretary Tim Geithner to lead the White House team, and Speaker Boehner’s tapped House Budget Committee Chairman Paul Ryan to lead Republicans, in preliminary talks for a fiscal cliff compromise so the 112th Congress can wind up and depart.
Secretary Geithner and Chairman Ryan have crossed swords before, as Geithner’s been the Administration’s point man defending the President’s budget in congressional hearings; their job now is to lay out a roadmap—how much revenue increase, how much in spending cuts, how much now and how much later.
Staffs on both sides have been talking globally at this point. The President wants revenue in the neighborhood of $1.6 trillion, mainly from higher tax rates on the wealthy; Republicans are looking for $600 billion now, more in tax reform later. Overhanging the talks is the President’s promise to veto any bill that doesn’t increase tax rates for filers with $250,000 or more income.
Republicans want significant cuts in entitlement programs—Medicare, Medicaid, and Social Security—but Democrats are offering only modest cuts, saying the public’s backing them. The highest support for any entitlement cuts in a recent poll was 31% for cutting Medicaid, 21% for Medicare, and 19% for Social Security. In the same poll, “none of the above” got 30%–meaning no cuts at all—so, combined with Defense and interest on the public debt, a large majority of the American people seem to place 80% of the Federal budget off limits. That leaves negotiators nowhere to go for savings but Defense and discretionary spending, unless the President decides to disappoint his liberal base and offer major entitlement cuts.
Both sides want to curb the $103 billion sequester, or automatic budget cuts, to go into effect by law on January 1st. Republicans want to eliminate a $51 billion cut in defense, Democrats are bent on preventing cuts to social programs. This is the short-term spending issue—it impacts the current fiscal year, the remainder of FY 2013. Going further, Republicans want to put into law certain commitments for additional spending cuts in Fiscal Years 2014 and beyond. Any such commitments would have to be analyzed by CBO, drafted, and enacted in the next few weeks. Without such commitments, Republicans say, they’ll be unable to agree to raising revenue by capping tax deductions and credits, or higher tax rates. You can see tax and spending issues are intertwined.
Spending and sequester being the province of House and Senate appropriators, these committees have been toiling quietly and cooperatively to produce workable, line-by-budget line appropriations for the remainder of fiscal year 2013. Recall that Congress has passed a Continuing Resolution that funds the government only for the first half of fiscal 2013, and any sequester deal has to be translated into practicable adjustments to appropriations accounts, the result is appropriations must be set for every department for the remainder of fiscal 2013. Without appropriators and their staffs, the job would be nigh impossible technically. It goes without saying it might be impossible politically.
We note these issues on the spending side of the fiscal cliff because they could hold up resolution of the tax side, where your Coalition is working for a tax bill carrying, as a minimum, the language of S. 3521 on WOTC and other tax extenders. Urgent also are alternative minimum tax relief for 2012, and an estate tax compromise—like extenders, they have bi-partisan support. Following regular order, there would be a separate tax bill and a separate spending bill. However, the politics of passage are so daunting it’s likely only a single measure will be written and voted on, and that means the tax part must wait on the spending part.
So long as we keep the pressure on (glad to see CEO’s of major corporations lobbying congressional Republicans who’ve been your Coalition’s principal lobbying targets this year), we think there’s a 70 percent chance Congress will pass AMT, WOTC and the tax extenders, and other provisions with bi-partisan support, before December 31st.
Our estimate is if an impasse over Bush tax cuts, debt ceiling, payroll tax, unemployment compensation, etc, occurs, Congress and the White House will enact what they can agree on—at least the tax extenders and AMT—and defer decision on what they cannot agree on. Supporting our push for this outcome is the plea of the Commissioner of Internal Revenue that 2012 tax rates must be settled urgently. Furthermore, if it transpires there’s to be a $400 billion hit to the economy by expiration of Bush, then passing the extenders, AMT and other provisions will at least prevent that hit from being $200 billion larger.
Many thanks to all who’ve been working hard in the campaign. If you have any questions, please contact me at 703-587-4566.
President, WOTC Coalition

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