Domestic Taxes

Democrats in the Senate and House have reached an agreement on a package of tax extensions.

At least 60 senators will support the deal reached on carried interest that is a part of the extender bill, sources tell The Hill. 

House Republican Conference Chairman Mike Pence (Ind.) predicts bailout efforts taking place in Europe could eventually cost U.S. taxpayers an additional $50 billion.

"If the European Union-wide bailout plan goes forward, American taxpayers could be on the hook for an additional $50 billion," he said Wednesday. "At a time of record unemployment in the United States of America, at a time of record deficits and debt, the American people should not be put on the hook to be bailing out the fiscal recklessness in Europe."

The United States is already on tap to pay roughly $7 billion of the $39 billion the International Monetary Fund (IMF) has pledged to help bail out Greece. The country will receive a total of $145 billion in loan guarantees from the IMF and the 15 nations that compose the European Union (EU).

Senate Finance Chairman Max Baucus (D-Mont.) on Wednesday said a tax increase on compensation deemed "carried interest" will likely be a part of legislation extending several tax and spending measures. 

"I do," he said, when asked if the tax increase would be included in legislation that ultimately passes the Senate. 

Despite the many setbacks that have befallen legislation extending several tax and spending measures, House Ways and Means Chairman Sandy Levin (D-Mich.) on Wednesday said that he still expects his chamber to complete work on the bill by Friday. 

"We hope to pass a bill this week," he told reporters, adding, "We're going to continue working on it and hopefully finish it today." 

Staffers are expected to meet this evening and resolve the bill's main sticking point: The 'doc fix,' a term that refers to delaying a cut in Medicare reimbursements to doctors. 

Rep. Chris Van Hollen (D-Md.) said Wednesday the "doc fix" is the number one hurdle in getting the Senate to support legislation extending several tax and spending measures. 

"As I understand it, the biggest issue is the doc fix," he said. "The other piece of it has been the composition of carried interest. Those are two things that we are having continued negotiations on." 

The "doc fix" refers to delaying a cut in Medicare reimbursements to doctors. The bill currently fixes the situation for five years and costs approximately $88 billion. This figure also does not require offset, according to pay-as-you-go rules. But senators are balking at its price tag and want to shorten the length of the fix by about four years.  

Republican Ways and Means members on Wednesday sharply criticized bills by Reps. Jim McDermott (D-Wash.) and Barney Frank (D-Mass.) to legalize Internet gambling and raise roughly $42 billion by taxing it. 

"People sometimes resort to drastic things when they are strapped for cash," said Rep. Bob Goodlatte (R-Va.), who testified before the committee. "However, it is unfathomable that Congress wold consider legalizing a currently illegal activity that imposes on the most vulnerable members of our society just to raise money for more big government spending." 

McDermott's tax proposal on Internet gambling was the subject of today's Ways and Means Committee hearing. The bill provides Treasury with the authority to establish regulations and license Internet gambling operators. 

Nursing homes are carefully tracking the tax extenders bill to see if it will fix a flaw in the health reform law that could endanger their payments under Medicare.

"Ultimately, [if nothing's done] we can't get paid because there's no mechanism for the payments," a nursing home source said.

Ironically, the industry wants Congress to reverse a one-year delay in changes to their payment structure that nursing homes themselves had asked for. Because the health reform law didn't delay two related provisions, the whole payment system is now out of whack, and the industry wants to go back to the original timeline that the agency that oversees Medicare had announced last fall. The update is set to kick in Oct. 1.

Both the industry and the Centers for Medicare and Medicaid Services have weighed in to get the fix passed, the source said. But it's not clear if the provision will make it in, the source said, because while the provision is uncontroversial in itself it would mean reopening the health reform bill.

Preventing cuts to physician rates under Medicare for five years would cost $94.2 billion.

The American Medical Association told specialty societies of the new figure last night, according to a lobbyist with knowledge of the conversation.

That’s up from $88.5 billion earlier, because the cost of preventing the cuts increases the longer Congress waits to act.

An agreement has fallen apart on an estate tax proposal that had appeared resolved between Senate Democrats and Republicans, a lead negotiator said Tuesday. 

Senate Minority Whip Jon Kyl (R-Ariz.) said the accord, which was all but forged a week ago, began to dissolve Monday night and broke down Tuesday after talks between leaders in both parties.

After talks with Senate Finance Chairman Max Baucus (D-Mont.) and Senate Minority Leader Mitch McConnell (R-Ky.), they scrapped a plan to move forward with the tax that expired at the end of 2009. 

The reasoning, Kyl said, is that Senate Democrats aren't allowing any legislation to reach the floor that doesn't have support from the majority of its members. 

"We no longer have an agreement because the Democratic side has decided that unless a matter has a guaranteed majority of Democratic votes going in, they're not going to allow it on the floor, at least not voluntarily," he said. "So we have to find a way to get a reasonable permanent estate tax reform to the floor where members can vote on it."

The agreement was being worked out among Sens. Chuck Grassley (R-Iowa), Blanche Lincoln (D-Ark.) and Baucus, among others, on specific terms and details on offsets, Kyl said.