Last week, the Senate and the House Ways and Means Committee approved competing tax bills that would extend a number of expiring provisions in the 2003 tax law (P.L. 108-27). The FY2006 budget resolution (H. Con. Res. 95) proposed the tax cuts as part of a larger budget reconciliation process (see The Source, 4/29/05).
Senate Action
Early in the morning on November 18, the Senate approved, 64-33, its $60 billion tax cut bill (S. 2020). The Senate Finance Committee approved the measure, 14-6, on November 15.
Sponsored by Senate Finance Committee Chair Charles Grassley (R-IA), the bill would extend a number of tax relief provisions that are due to expire in the next two years. Of particular interest to women and their families, S. 2020 would extend for one year a $2,400 tax credit for employers who hire individuals currently receiving welfare or food stamp benefits. The measure also would extend a credit for employers of individuals who are recipients of long-term family assistance. The work opportunity tax credit and welfare-to-work tax credit would be combined into a single credit.
The bill also would extend for one year an “above-the-line” tax deduction for teachers for the first $250 of out-of-pocket spending on school supplies. In addition, Qualified Zone Academy Bonds would be reauthorized through 2006 for expenses related to school modernization, equipment purchases, and teacher training.
S. 2020 would extend alternative minimum tax relief for one year through 2006. The bill also would extend through 2009 the saver’s credit, which provides a tax credit of up to 50 percent for contributions to 401(k)s, IRAs, and similar retirement plans.
During consideration of the bill, the Senate rejected, by voice vote, an amendment offered by Sen. Jeff Bingaman (D-NM) that would have provided a tax credit to businesses that offer health care insurance to their employees.
The following amendments were ruled out of order by the chair, and 60 votes were required to waive a budget point of order:
House Committee Action
On November 15, the House Ways and Means Committee approved, 24-15, its $56.6 billion tax bill (H.R. 4297). Sponsored by Chair Bill Thomas (R-CA), the Tax Relief Extension Reconciliation Act contains many of the same tax relief provisions as the Senate bill, but also would extend the reduced tax rates on capital gains and dividends for two years.
Specifically, the House bill would extend the small business tax deduction for two years; extend the saver’s credit through 2009; extend the deduction for teachers’ out-of-pocket expenses and Qualified Zone Academy Bonds through 2006; extend the welfare-to-work and work opportunity tax credits for one year; and extend the Medical Savings Account program for one year.
During consideration of the bill, the committee approved, by unanimous consent, a substitute amendment offered by Rep. Thomas that deleted many of the tax relief provisions in the bill. Committee Democrats offered a number of substitute amendments to reinsert the extensions, but those efforts failed. Instead, a number of the provisions were reinstated as individual amendments, including:
The committee rejected, 15-24, an amendment offered by Rep. Earl Pomeroy (D-ND) that would have provided a custodial parent a $500 tax credit per child for expenses incurred while attempting to receive child support payments from a non-custodial parent.
