By Bernie Becker - 12/12/11 01:15 AM EST
With Republicans and Democrats still taking potshots at the other’s plan, those advocates acknowledge that the finished product for a year-end deal extending the payroll tax cut has yet to be hammered out.
That, in turn, also gives backers of other tax ideas, like a repatriation holiday, hope that their idea can make the final cut.
House Republicans on Friday released their formal legislation to extend the current 2 percentage point cut in the payroll tax rate for workers and extend unemployment insurance benefits, both of which expire at the end of the year.
The measure has several provisions that Democrats object to, including a proposal to quicken approval of the Keystone XL oil sands pipeline.
House GOP leaders included the Keystone provision to shore up support for extending the payroll tax cut, after Democrats slammed Republicans for weeks for being reluctant to continue tax relief that helps many middle-class families.
But the capital investment provision, also called 100 percent bonus depreciation and one of the few tax proposals in the GOP plan, has support from lawmakers in both parties and a wide range of business groups. It also has proven to be less controversial than other tax ideas, like the repatriation holiday.
Rep. Richard Neal (D-Mass.), for instance, said he thought bonus depreciation could help spur demand in the economy.
“I think on one hand you can consistently reject the argument that tax cuts pay for themselves, and then conclude that there are other tax cuts that are better than others,” said Neal, a senior member of the House Ways and Means Committee.
Under the House proposal, both big and small companies would get to completely write off investments purchased in 2012, continuing a short-term policy enacted in last year’s compromise that extended the Bush-era marginal tax rates.
If the current policy is not extended, businesses would only be able to write off 50 percent of capital purchases in 2012.
Meanwhile, backers of a corporate tax holiday are looking to regroup after their proposal was not included in the House GOP proposal.
Supporters say their best chance of getting the holiday into a year-end deal was to get it tucked into the original House proposal.
But with the two parties in a stare-down over the Keystone pipeline, backers say they will continue to press to get repatriation enacted by the end of the year.
“The president has said he’ll reject any proposal with Keystone,” one supporter said. “So if that gets taken out, what’s in this package for Republicans?”
Republicans do by and large support the policy behind a repatriation holiday, which would temporarily reduce the tax rate on offshore corporate profits brought to the U.S.
But GOP leaders have also already split on whether to include repatriation in their payroll tax package, with some top lawmakers, like Rep. Dave Camp (R-Mich.), the House Ways and Means chairman, believing the idea needs to be included in the broader discussion over tax reform.
Republicans have noted other problems with incorporating repatriation in a package – including a projection from the nonpartisan Joint Committee on Taxation that a generic tax holiday would add some $79 billion to deficits over a decade.
GOP lawmakers have questioned some aspects of JCT’s findings, but some have also said that the deficit-adding score makes it more difficult for repatriation to make it into a final deal.
A tax holiday would also, as Rep. Pat Tiberi (R-Ohio) put it, affect only “a small sliver of American businesses.”
“Some of our members need something to point to in this bill that is stimulative in nature for businesses to hire people, because there’s a lot of people who believe the payroll tax isn’t it,” said Tiberi, who also wants to use repatriation in a broad tax revamp.
For their part, business groups like NFIB and the National Association of Manufacturers plan on continuing to sell the stimulative impact of bonus depreciation to lawmakers in the days to come.
Advocates have already been pressing that message for months, sending several letters to lawmakers asking for an extension of the write off policy.
Bonus depreciation, NAM’s Monica McGuire told The Hill “drives investment. Capital investment in turn drives economic growth. And that in turn drives employment.”