Hopes rise for major tax package

Congressional leaders and senior White House officials are scrambling to put together a major tax deal, with the talks showing new signs of life after faltering over the weekend.

Negotiations ramped up Monday evening on a deal that could balloon to $800 billion. Both sides are expressing optimism, though buy-in from the White House is still needed.

Senate Majority Leader Mitch McConnellMitch McConnellRubio: GOP Congress could go in different direction than Trump Pelosi blasts GOP leaders for silence on Trump Reid: Groping accusations show Trump’s ‘sickness’ MORE (R-Ky.) wants to show voters ahead of next year’s election that Republicans know how to govern. He said Congress would finish work on “either a couple-a-year tax package or a more robust tax package.”

“I lean toward the latter and I hope we can achieve that,” he said.

Senate Democratic Leader Harry ReidHarry ReidHeck's rejection of Trump imperils Nevada Senate race Pelosi blasts GOP leaders for silence on Trump Latinos build a wall between Trump and White House in new ad MORE (Nev.) wants a big deal as well, hoping to achieve several policy goals that eluded him last year when the White House blew up a tentative deal.

Reid said Tuesday the talks have gained new momentum.

“The negotiations got started in earnest last night. Over the weekend we didn’t get much done,” he said.

Sen. Ron WydenRon WydenSenators urge resolution of US, Canada softwood lumber deal What the 'Bernie Sanders wing of the GOP' can teach Congress Wyden seeks IRS info on firms linked to Panama Papers MORE (Ore.), the senior Democrat on the Senate Finance Committee, painted an optimistic picture during a private meeting Tuesday of Senate Democrats.

“I think it went through a trough this weekend, and then, maybe, early yesterday afternoon a bit of a breakthrough,” said Sen. Tim KaineTim KaineClinton running mate vows to 'bring folks back together' after election WATCH LIVE: Clinton, Kaine rally supporters in Pennsylvania Kaine hires transition director MORE (D-Va.). 

The core of a bigger deal would indefinitely extend the research and development tax credit and the Section 179 deduction for small-business expensing, two Republican priorities that have support from pro-business Democrats.

It would also make open-ended expansions of the child tax credit, the earned income tax credit and the American opportunity tax credit, central pieces of President Obama’s 2009 stimulus package.

Lawmakers are also debating provisions that would lift the ban on exporting U.S. oil and index the child tax credit to inflation.

 Republicans and Democrats are close to agreeing on delaying two major taxes, the “Cadillac tax” on high-benefit plans and the medical device tax.

But those proposals have run into opposition from the White House, which wants language fixing ObamaCare’s so-called risk corridors — a program intended to help insurance companies that take a financial hit by participating in government-run health exchanges.

That program is nearly out of money because of a policy rider sponsored by Sen. Marco RubioMarco RubioRubio: GOP Congress could go in different direction than Trump Poll: Clinton holds 4-point lead in Florida Republicans, it's time to stop asking 'What would Reagan do?' MORE (R-Fla.) on a year-end spending bill in 2014 that bars the Department of Health and Human Services from tapping into other accounts to fund it.

Rubio’s role has injected presidential politics into the debate, making it all but impossible for GOP leaders to agree to the White House’s demands.  

The talks appeared to hit a wall Monday when Republicans ruled out fixing the risk corridors, which they panned as a “bailout for insurance companies.”

“This is not on the table. Risk corridors is fully off the table,” said a Senate Republican leadership aide.

Despite the disagreement, Republicans are feeling optimistic they can get the healthcare pieces worked out.

Repealing the Cadillac tax, which hits the health plans of union members especially hard, is a priority of Reid’s and many Democrats.

There is also bipartisan support for repealing the medical device tax, though Democrats have insisted its impact on the budget be offset by other savings or tax increases.

House Ways and Means Committee Chairman Kevin BradyKevin BradyGOP lawmakers ask IRS to explain M wasted on unusable email system Rep. Brady plans to move tax reform legislation in 2017 US confirms China has ended tax breaks for domestic airplanes MORE (R-Texas), who turned up the pressure on the talks Monday night by offering a bill that would serve as a fallback if a major deal fails to materialize, said the ObamaCare provisions could still be added to the bill.

“Clearly, we’re moving forward with the two-year extension and considering adding a medical device and a Cadillac tax pause on there,” he said, adding that the decision will be made before the bill is taken up by the House Rules Committee on a to-be-determined date.

The two-year bill’s focus is “ensuring Americans that before we leave, we will do our work on these tax extenders,” Brady said. “The clock is ticking, it has to be done, it must be done.”

He said that negotiations on a bigger bill are continuing.

The White House distanced itself from the talks Tuesday.

“Ultimately, Congress will have to make their own determination about what’s included in that legislation and what the best way to pass it is,” said White House press secretary Josh Earnest.  

Republicans also want to add language to the bill lifting the ban on oil exports, but Democrats say they must get something “big” in return. A Democratic leadership aide said concessions on renewable energy tax credits would not be enough.

Reid said last week indexing the child tax credit for inflation, something liberals in both chambers say is crucial, would have to be included.

“One of the things we want to make sure [of is] that, on the child tax credit, it’s indexed,” he told reporters.

Tensions between Senate and House Democrats have emerged as the talks have progressed.

House liberals are worried the child tax credit will not be pegged to inflation and the entire package will cost too much, putting future pressure on spending programs.

“We’re opposed to this large — some $800 [billion] — bill,” House Democratic Whip Steny Hoyer (Md.) told reporters Tuesday. “We believe it undermines tax reform.

“And we believe further that it will undermine our investments in growing our economy — investments in education and healthcare, in infrastructure — that are critically important to grow our economy and be competitive in the 21st century,” he added. “So we’re hopeful that we will pass a reasonable tax extenders bill.” 

Reid later pushed back on criticism the package is becoming too expensive.

“These tax extenders, many of them are good for business, but those that are good for business are also good for everyday Americans, and each year we do that, they’re not paid for with rare exception. So I don’t know what people are talking about,” he said.

Reid added that House Democratic Leader Nancy Pelosi (Calif.) did not raise any objections about the cost during a conversation he had with her Monday evening.

Jordain Carney and Mike Lillis contributed.