Congress is still currently debating the extension of the two-month payroll tax cut which will expire at the end of February. Disagreements over how to pay for the tax break (scored at some $170B) have hindered lawmakers’ efforts to extend the break through the end of 2012, notwithstanding the fact that both sides of the aisle are, in principle, in support of the break.
House and Senate conferees met publicly this week to hash out their differences. E@lert has some observations: first, we have the possibility of yet another short-term extension of the payroll tax cut. Out here in the real world, we all know that would be a nightmare, but that doesn’t mean it won’t happen. The second observation is that there has been some discussion of including the general tax extenders on this bill. This would be a relief to all, businesses and individuals alike.
Now just because taking care of the general tax extenders (e.g., the AMT patch, the R&D credit, bonus depreciation, above the line deductibility of teachers’ expenses, etc.) is a good idea, and just because Senate Finance Committee Chairman Max Baucus (D-MT) stated that the fact Congress allows these extenders to expire each year is an “embarrassment,” it doesn’t mean that’s where our friends in Congress will land. In recent rprivate conversations with lawmakers, NAEA’s GR team has divined that the odds of including the general tax extenders are not great.
Bottom line: we should see some sort of payroll tax break extension, most likely through the end of the year, by the end of February. We may see some portion of the general tax extenders included in the package (though the odds are iffy on this. If we don’t see the general extenders in this bill, we probably won’t see any action on them until after the November election (during the lame duck session, which one legislator confided to us, “would suck”).