With the Republican takeover of the House of Representatives in January, Congressman Dave Camp (R-MI) is slated to become the Chairman of the House Ways and Means Committee. The Ways and Means Committee is currently composed of 26 Democrats and 15 Republicans. Two Republicans are not returning to the Committee, so if the ratios stay the same in the 112th Congress, then there will be 13 new Republicans on the Committee. Since Appropriation earmarks are currently in disfavor, you might see more Members interested in getting on the Ways and Means Committee than the Appropriations Committee. Because of term limits in the Senate, Senator Hatch (R-UT) will be the ranking member of the Senate Finance Committee. Senator Grassley will remain on the Finance Committee but will become the ranking member of the Senate Judiciary Committee.
What are the Pending Tax Bills?
The Bush 2001 and 2003 tax cuts that expire 12/31/10; alternative minimum tax (AMT) – expired 12/31/09; business and individual tax extenders that expired 12/31/09 and those that expire 12/31/10; estate and gift tax – in 2011 goes to $1 million exemption and 55% tax rate if nothing is done; and a green energy jobs bill.
What Happens on Tax Extenders During the Lame Duck Session? Worst case: Nothing happens on any of the tax bills. Best case: All of the above are packaged in one bill and passed permanently. This would cost about $4 trillion. If the Democrats and Republicans can reach an agreement on taxes the probable outcome is a one- or two-year extension of the Bush 2001 and 2003 tax cuts, AMT, business and individual tax extenders that expired in 12/31/09 and estate and gift tax back to the 2009 levels of a $3.5 million exemption and a 45% tax rate.
Dividends and Capital Gains Rates
The current rate for both dividends and capital gains is 15% which expire at the end of 2010. If allowed to expire, the tax rate on capital gains would rise to 20% and on dividends to a maximum tax rate of 39.6%. Any extension must be offset with additional revenue raisers (permanent extension would cost about $400 billion).
Debt Limit Extension
The current national debt limit is $14.3 trillion and will need to be extended by mid-year 2011 (current national debt is $13.6 trillion). Congressman Eric Cantor (R-VA), the likely new House Majority Leader, said last Friday that the GOP will demand spending concessions before agreeing to pass another Debt Limit Extension. The GOP also wants a “clean” vote on any debt limit increase, free of any additional measures. Any extensions of the tax bills will add to the debt limit unless they are offset with other tax increases.
The President's National Commission on Fiscal Responsibility and Reform is scheduled to release its recommendations on how to reduce the deficit on December 1, 2010. The Commission is composed of 6 Democrats, 6 Republicans, 4 representatives from business interests, labor unions and think-tanks and the 2 co-chairs: former Republican Senator Alan Simpson of Wyoming and Erskine Bowles, White House chief of staff during the Clinton Administration. Fourteen of the 18 members must agree on the recommendations (meaning at least 5 Republicans most sign off on the report). Speaker Pelosi and Majority Leader Reid have said they will find time for floor consideration of the recommendations during the lame duck.