If You Like Watching Tennis…Congress Tries to Pass a Tax Bill

Harry Moroz

If You Like Watching Tennis…Congress Tries to Pass a Tax Bill

Congress has punted on tax credit extensions and expansions for renewable energy, research and development, and, well, children for months. The House has voted for passage at least three times and the Senate once, but fiscally conservative Blue Dog Democrats in the House insist on a revenue-neutral bill, while the Senate has balked at money-raising provisions that tax hedge fund managers and multinational companies more strictly. Politico says legislators have been working on the extensions "almost since Democrats took over Congress."

Parliamentary maneuvering turned the Senate version of the Renewable Energy and Job Creation Act of 2008, passed by the body last week, into a pastiche of legislative initiatives (though its miscellany pales in comparison to the Coburn Omnibus). Along with tax credits for renewable energy, electric vehicles, and alternative fuels, the legislation includes the uncontroversial (yet seemingly impossible to enact) Mental Health Parity and Addiction Equity Act and a somewhat more controversial extension of relief from the Alternative Minimum Tax (the AMT is designed to prevent the wealthy from using massive deductions to avoid taxes).

The Senate’s Mental Health Parity provision, passed twice in slightly different forms as a stand-alone measure in the House, mandates that group health plans provide mental health and “substance use disorder” benefits that are at least equivalent to benefits offered for medical and surgical procedures. Many insurers currently impose stricter requirements on mental health benefits than they do on medical and surgical benefits.

As for AMT relief, the failure of the bailout bill in the House may end up granting middle-class taxpayers a reprieve. Although the House was scheduled to adjourn on Monday without agreement with the Senate about a legislative vehicle for passing AMT relief, the torpedoing of the bailout bill means that the House will remain in session, potentially providing more time for negotiators to work out a compromise. (Indeed, the House’s weekend session to negotiate the bailout provided an opening, as AMT relief bills that had a chance of Senate support were introduced, but then withdrawn, on Sunday.) Further, the Senate's vote on its own bailout proposal - scheduled for 7:30 tonight - will reportedly include both AMT relief and the tax credit extensions.

Failure to reach agreement on AMT relief would have grim consequences for the middle class. The non-partisan Tax Policy Center has shown that failure to provide AMT relief would result in a tax increase for more than 25 million American homes, exposing fully 46% of households with incomes between $75,000 and $100,000 to the AMT by 2010. While only 20,000 taxpayers were subject to the Alternative Minimum Tax in 1970, 4.1 million were subject in 2007, even after 2007’s temporary relief.

Conservative calls for a repeal of the AMT – a repeal Senator McCain has endorsed – is a hoax. The Tax Policy Center has also showed that if the AMT had been repealed in 2007, 96% of the tax cut would have been enjoyed by taxpayers in the top fifth of the income distribution, while at least $850 billion in tax revenue would have been lost by 2017.

All of the pieces of the Senate’s version of the Renewable Energy and Job Creation Act are important for the country’s middle class. Let’s hope that the bailout’s failure on Monday makes both parties more willing to compromise on perhaps a less ambitious, but no less important, legislative initiative.

Full analysis of the Senate’s version and the House’s first version of the Renewable Energy and Job Creation Act of 2008 are available on TheMiddleClass.org.