When Congress Returns: Conference on FY 2010 Budget Issues

April 5, 2009 07:00 PM

via a special arrangement with Informa Economics, Inc.

Earmarks and estate tax language are just two issues Democratic leaders face when lawmakers return

NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.

When lawmakers return from their Easter recess, a host of issues will confront Congress, with the initial one being a conference report on the Fiscal Year 2010 budget resolution.

The Senate adopted its $3.53 billion Fiscal 2010 budget resolution Thursday night, 55-43, with no Republicans supporting the plan and two Democrats — Evan Bayh of Indiana and Ben Nelson of Nebraska — voting against it.

The House adopted its budget on a 233-196 vote earlier Thursday with no Republicans voting for the proposal and 20 Democrats rejecting it.

The budget resolution is non-binding, but it does set the parameters for considering tax and spending bills later in the year. Aside from initiating the reconciliation process, it also sets the cap on how much can be spent on the annual appropriations bills. The House plan would provide $1.089 trillion in discretionary spending, when adjustments are factored in. That is about $8 billion more than proposed by the Senate budget, and $7 billion less than President Obama requested.

Democrats are hoping to have a budget deal done soon after Congress returns the week of April 20. Conference negotiations will focus on whether to include provisions that would, like the House plan, allow health care overhaul legislation move through the filibuster proof reconciliation process and how much in discretionary spending should be provided to the Appropriations panels to write the 12 annual spending bills.

The House resolution (HConRes 85) includes reconciliation provisions, while the Senate budget (SConRes 13) does not.

Estate tax language victory. Republicans scored a victory on the estate tax with the help of 10 Democrats (including the six senators from Montana, Arkansas and Washington), which means Senate Democrats are well short of the 60 votes they will likely need to enact Obama’s estate tax proposal this year.

Background: Under current law the estate tax — now with a top rate of 45 percent with an exemption of $3.5 million per person — will disappear Jan. 1, 2010, and will return with higher rates and lower exemptions in 2011 -- as of 2011, current law would drop the exemption to $1 million and push the rate up to 55 percent. `

The Obama administration wants to freeze the estate tax rate at its current level and index the current exemption for inflation (compared with the law as now written, that would cost $256 billion over the next decade, according to the Joint Committee on Taxation), but Sen. Blanche Lincoln (D-Ark.) proposed an amendment, adopted 51-48, that she worked out with Sen. Jon Kyl (R-Ariz.), that adjusts the budget to accommodate a 35 percent rate and an inflation-adjusted $5 million per-person exemption on the estate tax -- from $3.5 million to $7 million for individuals, and to $10 million from $7 million level for couples. It would also lower the top estate tax rate from 45 percent to 35 percent. It would create a deficit-neutral reserve fund that would require unspecified revenue-raising offsets to cover the cost, which is estimated at $28 billion over five years and $85 billion over 10 years, according to Lincoln’s office.

Senate Majority Leader Harry Reid (D-Nev.) spoke out against the amendment, noting the amendment would benefit only 0.2 percent of estates owned by the richest Americans. Lincoln argued the measure would benefit small-business owners and family farms and ranchers. “We’re not protecting the super, super wealthy,” she said. Senate Budget Chairman Kent Conrad (D-N.D.) criticized the $100 billion cost of the plan over the five years of the budget resolution. “Where does the money come from? Either cutting from somewhere else or raising taxes,” he noted.

Durbin amendment also approved. After adopting Lincoln’s amendment, the Senate adopted, 56-43, an amendment offered by Sen. Dick Durbin (D-Ill.) to create a point of order against any legislation providing additional estate tax relief beyond what is assumed in the resolution unless an equal amount of tax breaks are provided to those making less $100,000 a year.

The estate tax budget vote, though non-binding, sets up a debate on the contentious estate tax issue. “The rubber meets the road when we bring up a tax bill through the committee and the floor,” said Finance Chairman Max Baucus (D-Mont.). “That’s what counts. All these votes here [on the budget resolution], they’re important. But that’s not what’s most important.” Some observers note that Congress might extend current law for one year and include the estate tax issue with consideration of the rest of the 2001 and 2003 tax cuts, which expire at the end of 2010. Because this approach would raise money compared with the budget baseline, it could be a candidate for inclusion in budget reconciliation, which would require just a simple majority.

Cap-and-trade anxiety. The Senate budget debate also showed a lot of unease among some Senate Democrats and many Republicans about President Obama’s proposal to implement a cap-and-trade system for carbon emissions that would raise $646 billion in revenue over 10 years. Senators from industrial states fret it could cost jobs and cause their constituents energy bills to rise sharply.

Senate amendment: The Senate adopted, 65-33, an amendment offered by Sen. Lindsey Graham (R-S.C.) to create a 60-vote point of order against any legislation that includes any energy tax increases that would affect individuals with annual incomes of $200,000 or less, or married couples with incomes of $250,000 or less. Twenty-six Democrats supported Graham’s proposal.

Comments: The budget bills do not include provisions to deny direct payments to farmers with more than $500,000 in gross sales and a cap of $250,000 on farm program payments, two proposals pushed by the Obama administration and USDA Secretary Tom Vilsack.

Democratic leaders said that finishing work on the FY 2010 budget to clear action on the next supplemental spending bill for the wars in Iraq and Afghanistan and the regular FY 2010 appropriations measures will top lawmakers' agenda following the two-week recess set to officially begin April 6. Another focus this spring will be on legislation to address the nation's financial crisis, including measures to impose a new oversight and regulatory scheme and others to stop predatory lending practices. “It will be about the budget and the appropriations process and the financial crisis in our country,“ Pelosi said. “And we see them directly related.”

NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.


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