The White House threatened to veto a GOP effort to expand and indefinitely extend a popular tax credit for business research, deeming it fiscally irresponsible.
But like congressional Democrats, the Obama administration said it could not support extending the credit without offsetting its decadelong $156 billion price tag. Instead, the White House proposed paying for the measure by eliminating other tax breaks.
The House is expected to vote on the proposed extension of the credit on Wednesday. It is one of six tax breaks that expired at the end of last year — commonly called extenders because they must be renewed by Congress — that Republicans on the Ways and Means Committee want to extend for the long term.
“The administration wants to work with Congress to make progress on measures that strengthen the economy and help middle-class families, including pro-growth business tax reform,” the Office of Management and Budget said in its statement.
“However, making traditional tax extenders permanent without offsets represents the wrong approach.”
The White House noted that the cost of the expanded R&D credit dwarfed that of extending emergency unemployment insurance, which Republicans have demanded be offset.
Plus, the White House said that if Republicans took a similar approach on other expired tax breaks, the cost could escalate to roughly $500 billion over 10 years. That, the administration said, would wipe out most of the deficit reduction from the "fiscal-cliff" deal that President Obama signed in early 2013, which locked in higher tax rates on the highest incomes.
House Republicans have noted that the R&D credit has been extended off and on for more than three decades, often without offsetting its cost.
They’ve also pointed out that a bipartisan, $85 billion Senate bill to revive dozens of expired tax breaks also isn’t offset and insist that extending the R&D credit will be more beneficial to the economy than continuing jobless benefits.
The Senate could vote on a measure extending most expired provisions for two years as soon as next week. The House and the Senate will likely need to reconcile their approaches to the credits, something tax writers think will probably get pushed back until after November's elections.
The research and development credit also has broad backing from the business community. The National Association of Manufacturers sent a letter to House members on Tuesday urging them to support the measure.
But top House Democrats have already said that they would urge their colleagues to vote against extending the credit, saying it’s hypocritical for Republicans to allow this measure through without paying for it.
Only one Democrat, Rep. Earl Blumenauer (Ore.), voted to extend the credit when the Ways and Means panel considered it last week.
But the vote could also put some Democrats in an awkward spot. Nine Democrats have signed on to co-sponsor the extension of the R&D credit, which was introduced by Rep. Kevin Brady (Texas), a senior Republican on the Ways and Means Committee.
Two of those co-sponsors, Reps. John Larson (Conn.) and Linda Sánchez (Calif.), voted against the measure in committee last week.