A great deal of tax credits, that impact both businesses and individuals, expired on December 31, 2013. While both Republicans and Democrats support extending these cuts, they disagree on how best to implement them and whether they should be made permanent. Recently, there has been a push in the Senate and the House for tax-extender bills, but both bodies are approaching the extensions very differently.
On Thursday May 15, the Senate Republicans blocked the potential Senate Tax Extensions Plan, titled EXPIRE Act (Expiring Provisions Improvement Reform and Efficiency Act). The EXPIRE Act needed 60 votes to overcome filibuster, but it was defeated by a vote of 53-40.
The Act includes approximately $85 billion in tax cuts. The Senate’s final summary explains the bill “outlines principles of comprehensive tax reform.” The goals of the act are to: boost the economy, lower tax rates, and ensure the appropriate baseline for rates is used. This would broaden the tax code. The bill explains the Senate’s intention is to allow for the extensions to be in effect for rest of the Congressional year, with new, permanent reform beginning with the next Congress. Lastly, the new tax reforms will replace previous temporary provisions, with the intention that the new reforms will be lasting.
Many individuals, if not most, will likely benefit from the proposed tax cuts. The bill includes an extension of the previous Health Coverage Tax Credit (HCTC) into 2015. The bill allows for a two-year extension for the $250 above-the-line deduction for elementary and secondary school teachers for expenses incurred for books, supplies, and supplemental material needed to teaching in the classroom. The bill also extends the Economic Growth and Tax Relief Reconciliation Act (EGTRRA), which permits an above-the-line tax deduction for qualified higher education expenses.
There is also an extension for mortgage debt forgiveness, parity for employer-provided mass transit and parking benefits, deduction for mortgage interest premiums, deduction for state and local general sales taxes, and tax-free distributions for individual retirement plan for charitable purposes, among others.
It is not just individuals that would benefit from the EXPIRE Act. The bill also includes extensions for business tax credits, energy credits, and revenue rising provisions.
All of this sounds great! Everyone wants tax breaks and we are told both Democrats and Republicans support reform, so why did the Senate Republicans block a vote on the bill? Republican Senators felt they did not have a say in the bill and wanted an opportunity to input their ideas and opinions. However, if everyone wants reform, and people need the tax cuts, is an incomplete tax bill better than none at all?
It is important to note that the EXPIRE Act is not dead; rather, it is merely on hold and frozen for the time being. There is still a chance of a vote in the future, and there is also a possibility that these cuts can be administered retroactively to 2014 even if they are not passed until the end of the year. So stay tuned—because the fate of these tax cuts is uncertain. Tax reform may be on the horizon for the near future, but in the meantime, these credits remain expired.
By: Meghan Connelly