Extending Tax Credits for Corporations and Individuals
Many congressional leaders have expressed their interest in passing a tax extender bill in the Congressional lame duck session. Around 70 tax credits have expired in 2013 or will expire in 2014. If the president fails to extend these tax credits by Dec. 31, taxpayers will not be able to claim them for the current tax year. These tax extenders represent billions of dollars in the U.S. economy, and the beneficiaries of these tax credits range from large corporations to middle class people.
Lawmakers were reportedly close to a deal that would extend most of the expired tax breaks by two years while making some tax breaks permanent. Negotiated by outgoing Senate Majority Leader Harry Reid and House Speaker John Boehner, the agreement would have cost the U.S. government about $450 billion over the course of 10 years.
The White House quickly threatened to veto the plan once information about the agreement was leaked. According to the New York Times, White House Spokeswoman Jen Freidman said that the negotiated agreement provided too much for large corporations while neglecting middle class families and the working poor. This was reportedly due to the lack of an extension for the Child Tax Credit and the Earned Income Tax Credit, which both expire in 2017.
In response to the veto threat, House Ways and Means Chairman Dave Camp of Michigan introduced the Tax Increase Prevention Act of 2014 Dec. 1; it passed the House on Dec. 3. If enacted, this bill would retroactively extend about 55 expired or expiring tax credits for the 2014 tax year, allowing a Republican majority in both houses of Congress to revisit the issue next year. This tax extension bill is estimated to cost $44.7 billion over the next decade.
Congressional Democrats and the president have signaled their support for the bill. According to CQ, House Minority Leader Nancy Pelosi of California stated that this bill is a much better version of what Republicans proposed a few weeks ago. The president originally insisted that Congress proactively extend the Child Tax Credit and the Earned Income Tax Credit but is reportedly satisfied with Camp’s bill.
Camp’s bill also includes an itemized deduction for state and local sales taxes in lieu of an itemized deduction for state and local income taxes. This is important for residents of states that have no income tax.