Stakes high for Obama in year-end tax fight

Stakes high for Obama in year-end tax fight

The negotiations over a sweeping year-end fiscal deal may be President Obama’s last chance to shape tax policy.

The debate over extending a series of expired and expiring tax breaks presents a chance for Obama to cement a slate credits for working families and college tuition that were created or expanded by the president’s 2009 stimulus bill.

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In exchange, several big business tax breaks would be made permanent, and members of Congress are also pushing to include language delaying ObamaCare's "Cadillac" tax on high-cost insurance plans and medical device tax.

The stakes are high for the White House because there is unlikely to be another opportunity for Obama to cement the stimulus tax provisions before he leaves office.

“This really is it in terms of tax policy,” said one tax lobbyist, who asked not to be named. He pointed out that there is unlikely to be other must-pass legislation on the tax front in the next year.

“It’s his last chance to cement his legacy with respect to the stimulus,” added PricewaterhouseCoopers’s Rohit Kumar, a former deputy chief of staff for Sen. Mitch McConnell (R-Ky.).

Kumar said that Republicans see it has Obama’s final opportunity as well, which they believe “gives them some leverage.”

Obama has had both huge victories and bruising losses in past year-end tax battles with Congress, which have become routine in December in his presidency.

In the 2013 fiscal cliff deal, for instance, the president was seen as coming out on top, winning the reinstatement of a 39.6 percent tax rate over the objections of Republicans. Three years earlier, however, he conceded on extending George W. Bush-era tax cuts for two years, even those for the wealthy.

In this year's fight, the administration’s biggest priority is ensuring extensions of benefits for families as well as businesses.

Last year, lawmakers began pushinga deal that would have made some of the business tax breaks permanent, but talks fell apart because the White House threatened to veto over the absence of provisions for families.

White House Press Secretary Josh Earnest stressed this week that Congress is negotiating the deal, but he said that “obviously the White House is interested in those conversations to the extent that we believe that if we’re looking to extend a tax benefit that is enjoyed by large companies, we need to make sure that there are some tax benefits that are included for middle-class families, too.”

While the White House has downplayed its role in the talks, others have said administration officials are involved.

“They have been constructive throughout, and they continue to be,” House Ways and Means Committee Chairman Kevin Brady (R-Texas) said Friday.

House Democratic Leader Nancy Pelosi (Calif.) said that members of her caucus won’t support the deal and that she’s not part of the negotiations because she thinks the deal is the wrong approach. But she said the White House would remain involved in the talks since Obama would have to sign any deal for it to be enacted.

“We have shared values on this, and at some place, this bill will be improved by the negotiation that the White House will have because they want to sign something,” Pelosi said.

If Republicans and Democrats in Congress and the White House are unable to reach an agreement on a big package, Congress will likely pass shorter-term legislation.

On Monday, Brady released a back-up bill that would extend the expired tax breaks through the end of 2016. Since the provisions can be renewed retroactively, passage of such a bill would mean that discussions over the tax breaks wouldn’t come up again until 2017, after Obama leaves office.

Brady has said that pauses of the ObamaCare taxes may be added to the two-year bill. But there would be no extensions of the stimulus credits, whose key provisions don’t expire until the end of 2017.

Some lobbyists suggested that by offering the two-year bill, Brady was sending a message to Obama.

“The two-year bill makes it clear that this is the last chance for this administration to impact tax policy,” Sage Eastman, a lobbyist at the firm Mehlman Castagnetti, told The Hill shortly after that bill was released. “They can either strike a good deal, or they can accept the status quo — which puts some of their key provisions at risk.”

Kumar said that he viewed Brady suggestion to include the freezes on ObamaCare taxes in the two-year bill as a “shot at the administration.” The White House is particularly trying to avoid a short-term bill with the ObamaCare provisions, he added

The White House may push for a one-year extension as a fallback to a bigger deal instead of a two-year bill, so that Obama would have another chance to try to cement the credits for families, some lobbyists said. However, Senate Finance Committee Chairman Orrin Hatch (R-Utah) has said he won’t pass an extenders bill that’s shorter than two years.