The voices of Tax Policy Center's researchers and staff
The least popular Congress in memory is back. I, personally, am thrilled.
After a year in which lawmakers did almost nothing besides (barely) keeping the government running, this session promises hardly more. Tax policy will be at the center of much of the partisan squabbling, but it is hard to imagine Congress achieving more than a temporary truce in its ongoing battle over last year’s unfinished business.
That skirmishing starts with the 2011 payroll tax cut which, after a bruising battle last December, Congress extended only to the end of February. It also includes about four dozen other temporary tax cuts that expired last December 31. On the spending side, lawmakers must resolve controversies over extended unemployment benefits and Medicare physician payments—the so-called “doc fix”-- that also must be addressed by March.
But all that will just be a warm up for what promises to be an awful year-end when lame-duck lawmakers will face their own version of an ugly triple witching hour.
They’ll have to decide what to do about the expiring Bush-era tax cuts that were extended at the end of 2010 by President Obama and a Democratic Congress, as well as several of Obama’s own temporary tax cuts. And they need to extend the “patch” that protects 25 million households from the Alternative Minimum Tax.
There's more: They’ll also have to figure out what to do about the automatic across-the-board spending cuts that are supposed to be the price of Congress’ failure last year to cut the deficit by $1.2 trillion. And Congress will have to vote yet again on a debt limit extension. All of this will likely happen in a lame-duck Congress that must negotiate with Obama, who either will have been reelected or will himself be on the way out the door.
My best guess is that the payroll tax cut ( as well as unemployment benefits and the doc fix) will get extended through the end of the year with surprisingly little controversy. Here’s why: There is a good chance that Mitt Romney will be well on his way to winning the GOP presidential nomination by the end of January. And Romney will let congressional Republicans know that the payroll tax flap needs to go away for the duration of his campaign.
This will not make the House GOP rank-and-file—the Braveheart Caucus—very happy. But Hill Republicans suffered some pretty serious self-inflicted wounds late last year when they tried to explain why they were on the wrong side of what Democrats gleefully characterized “a tax increase on 160 million working Americans.” It is hard to imagine that, in the end, they’ll buck both Romney and their own leadership by resisting a 10-month extension.
That leaves the musical question: How will Congress pay for an extension of the payroll tax cut as well as extended unemployment benefits?
Democrats seem to have abandoned their millionaire surtax and may be reverting to Obama’s original idea—a mix of cats-and-dogs tax hikes and some modest spending reductions. In the end, that will be good enough for the GOP leadership that, like Romney, wants the payroll tax mess to disappear.
And so it will—until after the election. Then, at the end of the year, the payroll tax, unemployment benefits, the doc fix, and the other temporary tax cuts will get tossed into the lame-duck fiscal salad along with the rest of the spoiled fruit that passes for policy these days. That's when, after doing essentially nothing from February through December, Congress will have a food fight for the ages.
Posts and comments are solely the opinion of the author and not that of the Tax Policy Center, Urban Institute, or Brookings Institution.