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House Will Push Back Votes on More Permanent Tax Credits

The House, which passed one permanent extension of an expired business tax break, will delay any action on other so-called extenders until at least June following the demise this week of the Senate’s two-year tax break patch.

House Republican leaders on Friday finalized plans for floor action for the coming week that did not include proposed individual bills some GOP lawmakers want, and action on any of the separate measures is unlikely in the coming brief work period.

Senior GOP aides said the House would put off further action on five remaining permanent tax-break extensions that passed out of the Ways and Means Committee until next month. Lobbyists said the House likely would move next on a $73 billion proposal (HR 4457) by Pat Tiberi, R-Ohio, to make permanent the $500,000 cap for small business expensing.

Tiberi and other supporters of small business tax incentives had hoped to tap momentum from the House passage, 274-131, of a $156 billion permanent extension of the research and development tax credit (HR 4438) on May 8.

But Boehner and other GOP leaders signaled Friday they would pivot the week of May 19 to a proposal (HR 4031) to make it easier fire and demote Department of Veterans Affairs officials.

John J. Pitney Jr., a political scientist for Claremont McKenna College, said the delay increased the chances that a final tax deal would not be cut until after the election. He said House Republicans were seizing on a hot political issue — a backlog in veterans’ disability claims — and also taking care to build more consensus on taxes in coming days.

Pitney said the collapse of the Senate tax-break proposal demonstrated the volatility of tax-related issues in an election year. He said pending permanent tax break extensions in the House, could draw opposition from both parties. “The research and development tax credit is easier to explain than the others: China is getting ahead on research and we need to keep up. The other extenders need more care and feeding,” Pitney said.

A prolonged tax stalemate loomed after the unraveling of support for a two-year tax break extension plan in the Senate. The Senate by a 53-40 vote on Thursday fell short of the 60 votes needed to invoke cloture on a substitute amendment to the House-passed vehicle (HR 3474) for the stopgap plan (S 2260).

Rep. Ron Kind, D-Wis., said Friday that Democratic leaders would redouble efforts to expand a crucial core of opposition in their caucus to permanent tax break extensions on the grounds that they lack offsets to match their cost. On the research and development tax credit, 62 Democrats broke ranks to vote with Republicans.

“The president and the administration have made clear they want offsets. On the last vote, we had the votes to sustain a presidential veto,” Kind said.

He said there was a good chance of more opposition from Democrats and possibly from some Republicans on pending tax break extensions because of concerns raised by fiscal watchdog groups about the $310 billion combined price tag of all six permanent tax break extensions.

Only one Republican, John Campbell of California, voted no on the research and development tax credit. He cited his desire to eliminate tax breaks in order to lower tax rates. Campbell’s argument could resonate in coming days as Republicans look to rally their base in the primary election season.

Kind said the decision by GOP leaders to delay votes on permanent extension was a sign of doubts about the outcome of floor votes. Kind said he would vote no in solidarity with party leaders on the small business expensing bill, even though he is a co-sponsor.

Kind said would take a similar stand on another small business bill he backed with Rep. Dave Reichert, R-Wash. Reichert’s bill (HR 4453) would make permanent the shorter five-year recognition period for built-in gains (BIG) taxes on some S corporations.