Domestic Taxes

House Ways and Means Chairman Sandy Levin (D-Mich.) on Tuesday said despite bipartisan pushback on the tax increase for carried interest that is included in legislation extending several measures, the provision will not be changed. 

"We've already worked hard to balance all of the needs, here," he told reporters. "The basic principle is, if it's your money [at risk] you pay capital gains; if you're managing other people's money, essentially you pay ordinary income tax like everybody else." 

That assessment is not sitting well with several House Democrats.

A $200 billion bill that revives several tax breaks is in a holding pattern again but is still on the week's agenda after a raucous hearing Monday night. 

There wasn't any resolution on the contentious extenders measure as a House Rules Committee hearing devolved into partisan sniping, most likely pushing the measure back to Wednesday so any remaining issues, especially among House Democrats, can be resolved. The bill was expected to be ready for House action Tuesday. 

The measure is a priority for House and Senate leadership and they are aiming to get the bill to President Barack Obama's desk by Memorial Day.  

House Ways and Means Chairman Sandy Levin (D-Mich.) and several other Democrats scheduled a Tuesday morning conference call with reporters about the way forward. 

House Rules Chairwoman Louise Slaughter (D-N.Y.) on Monday was forced to apologize for the behavior of her committee after a hearing on legislation extending several measures devolved into an endless exchange of personal attacks and name-calling between the panelists and House Ways and Means Chairman Sandy Levin (D-Mich.), who testified before the committee about the extender bill.

The Tax Policy Center on Monday found the tax reform bill authored by Sens. Ron Wyden (D-Ore.) and Judd Gregg (R-N.H.) would raise about as much revenue over the next 10 years as the current system, assuming all the tax breaks enacted under former President George W. Bush are extended and the 2009 AMT exemption level is indexed for inflation. 

House Republican Conference Chairman Mike Pence (R-Ind.) on Monday blasted legislation costing roughly $200 billion that extends several tax and spending measures because it would increase taxes.

"This so-called American jobs bill includes a net tax increase of $40 billion," he told reporters. "Only Democrats in Washington, D.C., think you can raise taxes and create jobs in the worst recession in 25 years." 

Pence stopped short of saying no Republicans would support the bill, but highlighted the fact that many of his colleagues would not be in favor of the tax increase. 

Senate Finance Chairman Max Baucus (D-Mont.) and ranking member Chuck Grassley (R-Iowa) on Monday introduced legislation granting employers a streamlined $6,000 tax credit for hiring recently discharged veterans. 

The bill eliminates the administrative burdens that make the current Work Opportunity Tax Credit directed toward unemployed vets difficult for some small businesses to use. 

"This tax cut will help create new job opportunities for veterans by giving employers incentives to do the right thing and offer our veterans a job," Baucus said in prepared remarks. 

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Despite supporting the tax measures resuscitated in legislation extending several measures, the U.S. Chamber of Commerce opposes the extender bill because of the tax increases it would inflict on businesses. 

"Ultimately, we have no choice but to oppose this legislation as drafted because it is a job killer," said Bruce Josten, the Chamber's chief government affairs person, in prepared remarks. "While the Chamber believes the economy needs an extension of expired provisions, we believe that this legislation will do more harm than good." 

Among the tax increases in the bill, dubbed the American Jobs and Closing Tax Loopholes Act of 2010, are those on carried interest and so-called S corporations. Both, the Chamber argues, will hinder job creation. 

A homebuyer tax incentive combined with improving consumer confidence and affordable options drove sales of previously owned homes in April to the highest level in five months. 

Purchases rose by 7.6 percent, up 23 percent from April 2009, the highest sales since November when the tax incentive was first set to expire, the National Association of Realtors (NAR) announced Monday. 

The tax incentive — worth up to $8,000 and aimed at first-time homebuyers — expired April 30 but homebuyers have until June 30 to close. The tax credit was extended from last fall with an initial expiration date of November 30.

Although there may be some temporary fallback for some months after the tax break, "other factors are supporting the market," said Lawrence Yun, NAR's chief economist, in a release. 

The National Center for Policy Analysis study says that tax credits in the new healthcare law could negatively impact hiring.

Democratic efforts to hike taxes on hedge funds and other investment managers will raise $19 billion during the next decade, according to a nonpartisan estimate late Friday.

House and Senate Democrats are looking to increase taxes on "carried interest" at hedge funds, real estate partnerships, private equity firms, venture capital companies and other funds. Democrats intend to use the increased tax revenue to pay for a package of spending provisions, including an extension of unemployment benefits.

The carried interest tax is an offset for $174 billion in new spending under the package, according to the Congressional Budget Office (CBO). The measures are part of legislation up for consideration in the House as early as next week.

The carried interest tax would raise $19 billion between 2010 and 2020, according to estimates prepared by CBO and the Joint Committee on Taxation. The estimates were sent to House Ways & Means Committee Chairman Sandy Levin (D-Mich.) on Friday evening.

Lawmakers are looking to change the tax structure so that fund managers pay more of their taxes at higher income tax rates rather than lower capital gains rates. Starting in 2013, 75 percent of carried interest would be taxed at higher income rates and the remaining 25 percent would be treated as capital gains, according to a summary of the legislation.