Thanksgiving is in the rearview mirror, Christmas in the windshield and, given the glacial pace of key policy decisions awaiting resolution in Washington, D.C., it’s just another Groundhog Day out here in rural America.
Those decisions, after two years of heavy duty do-nothingness, are coming slower than the deadlines faced by this Congress and the new one come January.
Government funding
First up is funding the federal government. The current short-term fix ends Dec. 11. As is typical in Washington these days, a behind-closed-doors deal appears to be well in the works but you and I, who the deal most affects, likely won’t know anything about it until it’s a done deal.
Next up is a bitterly fought-over package of retroactive tax cuts, including two fat ones for agriculture — bonus depreciation and one-year expensing of $500,000 in capital equipment. This tax deal must be done before the House adjourns and leaves for Christmas, again, Dec. 11. More on this later.
Deadlines loom
Other equally tough, equally tight deadlines will challenge the 114th Congress. On March 16, the federal government’s borrowing limit, by law, must be reinstated. Twelve days later, on March 28, Medicare payments to doctors all but end. Then, on Sept. 30, the toughest nut to crack in 2015, a new federal budget needs to be in place.
Anyone see any problems with a newly empowered Republican Congress and newly emboldened Democratically-led White House meeting these challenges by their must-be-done deadlines?
The recent standoff between Congress and the White House over what most in farm and ranch country see as a necessary extension of dozens of expired, temporary tax breaks offers some insight.
When Congress started to focus on extending the tax breaks after the November election, GOP leaders, with help from a handful of Democratic colleagues, hoped to make most permanent. What they didn’t focus on, however, was the cost—and it’s enormous.
Favored by ag
For example, the two tax plums most favored by agbiz, farmers and ranchers, the bonus depreciation and $500,000 expensing, would, if made permanent, cost the U.S. Treasury about $360 billion over the coming 10 years: $73 billion for the expensing law; $287 billion for the bonus depreciation law.
That revenue hit brought an immediate veto threat from the White House, which said the GOP-driven, deal favored wealthy individuals and firms over the working poor and middle class. It also put Congress on notice that any tax extension deal that big needed to include an extension of the Earned Income Tax Credit, an almost 40-year-old program that lowers federal taxes on low-income, working Americans.
The threat was enough to force Congress to drop ideas of making the cuts permanent and go back to renewing 49 or so of the 2013-expired cuts through the end of 2014. The new House proposal, should the Senate and White House agree, would add about $4.5 billion to the federal deficit. (It would also make for one of the shortest tax cuts in American history—two weeks—before expiring Dec. 31.)
House bill
Under the House deal, Big Ag would get everything it asked for: bonus depreciation, the $500,000 expensing benefit, $1 per gallon production tax credit for biodiesel, 50 percent bonus depreciation for cellulosic biofuel facilities and, among other breaks, a .50 per gallon alternative fuel tax credit and alternative fuel mixture tax credit.
If the tax cut package is adopted as proposed, a Dec. 1 House Ways and Means Committee report estimates these five tax breaks for all U.S. businesses would cost taxpayers about $470 million in 2014.
(Editor’s note: House members passed a one-year extension of tax breaks for businesses Dec. 3, including Section 179, which allows farmers to deduct $500,000 annually for expenditures under $2 million, a tax credit for biodiesel, and a wind-production tax credit. The Senate has yet to take up the issue)
Moreover, if the deal clears Congress and the White House does sign it, the entire back-slapping, back-biting and back-stabbing process will begin again less than a month now from when the new Congress, with its now-GOP dominated House and Senate, convenes. One of its top five priorities? Tax reform.
So expect Groundhog Day almost everyday before and after the yet-to-be-seen New Year’s Day, Groundhog Day, Valentine’s Day, President’s Day, Memorial Day…
