House Republicans last week approved a one-year extension of the Bush-era tax cuts after rejecting a Democratic proposal to limit the extension to family incomes below $250,000 a year.
The Republican plan was approved on a 256-171 vote, mostly along party lines.
Last week the Senate approved the Democratic proposal. The votes underscored the unwillingness of the two parties to cooperate ahead of the November election.
Under both parties’ proposals, federal revenues would fall and deficits would increase relative to current law, which calls for all of the Bush-era tax cuts to expire at the end of this year. Extending them all for a year would cost the government $179 billion in lost revenue, $32 billion more than if the extension were limited to family incomes under $250,000, according to the Joint Committee on Taxation.
Under either proposal, income below the threshold would be taxed at the lower rates -- even for taxpayers with total incomes above the threshold.
The administration and the Congressional Budget Office (CBO) say permanently extending all of these cuts would cost the government around $2.8 trillion over 10 years relative to the current-law baseline. Restricting the extension to family incomes under $250,000 would limit the government’s loss over that period to $2 trillion.
The 2001 and 2003 tax cuts are not the only expiring tax cuts to worry about. CBO estimates that extending relief from the Alternative Minimum Tax (AMT) would, together with the Bush-era cuts, cost the government more than $4.5 trillion over the next decade -- not including additional interest costs. Adding about 80 other expiring tax provisions would bring to the cost -- still not including interest -- to $5.4 trillion over 10 years.
On Thursday the Senate Finance Committee approved a $205 billion measure that would continue dozens of tax breaks that are scheduled to expire soon. It includes an AMT “patch” to protect moderate incomes and would extend credits for renewable energy and for research and development.