The vote on H.R. 4853 (or more precisely, the motion to concur in the House amendment to the Senate amendment with Amdt. No. 4753 to H.R. 4853) was 81-19 in support. The margin of victory should provide momentum for passage as the House takes up the bill Thursday.

This is good legislation, a compromise with many more plusses than minuses in terms of jobs and economic growth. As the National Association of Manufacturers’ “Key Vote” letter in support of the bill summarized:

Manufacturers strongly support extending the 2001/03 tax relief to all Americans. Over 70 percent of U.S. manufacturers file as S-corporations or other pass-through entities; most would be significantly and adversely impacted by the higher tax rates that will take effect without congressional action. The non-partisan Congressional Budget Office estimates that fully extending the 2001/03 rates would add between 600,000 and 1.4 million jobs in 2011 and between 900,000 and 2.7 million jobs in 2012. Moreover, lower tax rates on capital gains and dividends will boost capital investment and economic growth.

The NAM has consistently called for repeal or significant reform of the estate tax. For small and medium-sized manufacturers (SMMs), business owners and families, the estate tax is more than a one-time tax. In a 2009 survey of our SMM members, respondents said they spent, on average, $94,000 annually on fees and estate-planning costs in preparation for their estate tax bill. This is money that could have been used to grow businesses and add jobs.

Renewal of the research and development (R&D) credit and other business extenders is critical to manufacturing competitiveness and should be extended. Manufacturers claim nearly 70 percent of the R&D credit, and R&D fuels innovation that translates into new products, increased productivity and jobs. Similarly, extension of deferral for active financing and the look-through rules will help U.S. competitiveness. Other extenders promote energy efficiency and make permanent important employer-provided education assistance. Moreover, the 100-percent expensing provision will create a positive ripple effect in the economy by encouraging investment and creating demand for machinery and equipment.

Update: From The Business Journals, “U.S. Senate approves Obama tax-cut deal“:

Ryan Ellis, tax policy director at Americans for Tax Reform, has put together an excellent summary sheet that clarifies what business extenders are, why they belong in the tax extension compromise before Congress, and why they are NOT earmarks.

From “Why Business Extenders in the Tax Deal Aren’t Earmarks, TARP, Pork, Etc.“:

Business extenders are various deductions and credits which have been in the tax code for many years. There is nothing special or different about them.  They are deductions and credits in the same way the student loan interest deduction is.  The only difference is that Congress puts an expiration date on these deductions and credits so that a “must-pass” legislative tax vehicle is manufactured every year or two.

Business extenders are far from ideal tax policy, as are permanent deductions and credits such as the student loan interest deduction, the state and local tax deduction, and many others.  On the merits, they should not exist in a broad-base, low-rate tax code.

However, American employers face the highest corporate income tax rate in the developed world (40 percent with states). These business deductions and credits are what make this confiscatory tax rate tolerable.  Getting rid of them is a good idea, but only in the context of fundamental tax reform that is revenue-neutral and lowers marginal tax rates.

Tax extenders are not earmarks, etc. The invectives applied to them are more properly applied to spending programs.  Only spending programs can be pork, earmarks, or bailouts.  Letting people (or, in this case, employers) merely keep their own money is not “spending money on them.”  In order to think that it is, you have to assume the government has a right to all their money in the first place, and by letting companies keep some of it, they are getting money spent on them.  That’s absurd, and hardly correct tax policy from a conservative perspective.

The extenders in question total $55 billion in tax relief out of a total of
$801 billion in tax relief.  As a percentage of the entire package (7 percent) the amount of attention they have received has been disproportionate. Congress has approved preventing these tax hikes from happening dozens of times over the past decade.  They simply are not new or controversial.

The whole point of this tax deal is to prevent taxes from going up on anybody.  It would be wrong to leave American employers with a tax increase at a time of nearly 10 percent unemployment. Congress should avert this tax hike on employers.

We urge Congress to pass legislation in the lame duck session to extend critical tax provisions that, while temporary in nature, are critical to our economy. It is of the utmost importance to all of us, and to the health of the U.S. economy, that this extension be enacted before the end of the year and apply seamlessly, at least through 2011.

Expiration of many of these provisions has already caused job losses, and the uncertainty around their extension will lead to further dislocations just as the fragile economic recovery is beginning.

The House Democratic caucus is fuming, but …

From NationalJournal.com, “The Rupture Between House Democrats and the White House“:

Still, the current thinking is that the Senate passes it without amendment, and the House receives it next week  when the U.S. Chamber of Commerce and others, possibly the Business Roundtable and National Association of Manufacturers, weigh in.

If they’re in favor, the pressure will be too great for the Blue Dogs, New Democrats, and wobbly Republicans to resist. But this is a strategy and a chalkboard play that lacks one key ingredient — the football. The lack of a bill makes all of this theoretical.

The NAM already weighed in! Here’s our news release, “Manufacturers: Proposed Compromise on Tax Relief Is a Positive Step for Jobs and Economy.”

And since the article was written, there does appear to be a bill. The Senate Democratic caucus has released the text of legislative language, “The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010.”

Almost 1,300 organizations this morning joined together in sending a  letter to all members of Congress asking them to “extend the extenders” during the lame-duck session.

Effective Jan. 1, 2010, a number of temporary tax provisions that benefited a wide range of individuals and businesses expired. Despite broad-based support for these provisions, Congress has yet to extend these important tax provisions.

The National Association of Manufacturers and other organizations signing the letter say the current lame-duck session gives legislators one last chance to extend these important tax incentives.  If Congress fails to act, taxes will increase for a wide range of taxpayers and job creators including manufacturers, teachers, developers, retailers and farmers.

Dorothy Coleman is the NAM’s vice president for tax and domestic economic policy.

From the Senate Finance Committee, chaired by Sen. Max Baucus (D-MT), “Baucus Introduces Bill to Create Jobs and Extend Family, Worker, Employer Tax Cuts”:

Washington, DC – Senate Finance Committee Chairman Max Baucus (D?Mont.) today introduced fully paid-for legislation to create jobs and extend critical tax cuts for individuals, families and employers, while closing tax loopholes for wealthy investment fund managers and large corporations. The bill would cut taxes for families paying college tuition, state and local taxes, and property taxes. It would cut taxes for employers to spur research and development and investment, freeing up cash to expand and hire new workers. And the legislation would bolster career training programs and provide wage assistance to help employers hire workers to help our economy grow.

The bill features many one-year extensions of current tax programs, exemptions, incentives and the like. For example, the R&D Tax Credit would be extended for one year,  retroactively from the start of 2010.

News coverage …

• CQPolitics.com, “Senator Takes Another Shot at Moving a ‘Tax Extenders’ Package“
• WebCPA.com, “Baucus Introduces New Tax Cut Extenders Bill“
• Business Insurance, “Newest tax bill retains punitive damages provision“
• Bloomberg, “Build America Bond Extension for 1 Year Offered in Senate Bill“

(continue reading…)

The National Association of Manufacturers is a member of the PACE Coalition, which stands for Promote America’s Competitive Edge. Other groups in the coalition are the Business Roundtable, Information Technology Industry Council, National Foreign Trade Council, and U.S. Chamber of Commerce.

In a May 24 letter, the PACE Coalition expressed sharp opposition to the tax increases included in H.R. 4213, the tax extenders bill (plus tax increases, unemployment and COBRA extension, Medicare reimbursement rejiggering and state budget bailout). Excerpt from the letter:

The members of PACE, including the undersigned trade associations, advocate that the United States maintain a level playing field for taxation of international operations. The proposed $14 billion in proposed tax increases included in H.R. 4213 do entirely the opposite and unilaterally disadvantage U.S. companies. American global companies already struggle under a worldwide tax system and one of the highest corporate tax rates in the world. The proposed changes in the international tax rules will make a bad situation worse, making it even more difficult for American worldwide companies to compete.

Since PACE was formed in early 2009 Coalition members have urged policy makers to consider changes to our international tax laws in the broader context of tax reform that makes us more competitive and not use international tax increases as “pay fors” outside of that context. Moreover, “picking off” some international tax law changes in advance of tax reform would make pro-growth, pro-competitiveness reform more difficult, if not impossible.

The letter notes prominently that the groups support many of the pro-growth tax relief provisions in the bill.

House debate is expected to start this afternoon after the parties return from the weekly caucus meetings. More …

• Bloomberg, “IBM, Business Groups Oppose Job Bill Over Tax Raisers“
• Heritage Foundation, “Routine Tax Extenders Package Contains New Irresponsible Spending and Tax Hikes“
• The Hill, “Business Roundtable declares extender bill a job killer”
   

The Senate just this afternoon cleared final passage by a vote of 62 to 36 of a Jobs/Unemployment Benefits/Tax Extenders bill (H.R. 4213) that restores the proven tax incentive to keep jobs here in the United States and place our country in the global race for investment dollars. 

How does it keep jobs here?  The credit cuts the cost of doing R&D here in the United States.  More than 70 percent of credit dollars are attributable to R&D wages (remainder is used for supplies & materials).  What race?  The race that has 20 OECD countries, many of which are our major trading partners, offering an R&D tax incentive while the U.S. watches R&D drift offshore attracted by more generous and often permanent R&D tax incentives.

Manufacturers, which must be high-tech to survive in a fiercely competitive global market, are innovators, using R&D to develop new products and increase productivity.  Manufacturers lead innovation, create opportunity, and pursue progress.  R&D drives all three of these characteristics of a modern manufacturer.

Next step:  Congress should send ASAP to the President a tax bill that fully restores the R&D tax credit. 

Monica M. McGuire is senior policy director for taxation at the National Association of Manufactures and serves as executive secretary of the R&D Credit Coalition.

Jim Angle at Fox News explains the tax provisions included in the financial markets bill are, in fact, non-controversial and provisions already passed in the Senate by a vote of 93-2. And the AMT fix. 

And that wooden arrow provision that’s drawn such critical attention?

ANGLE: The bill also extends things such as deductions for tuition expenses, allowing teachers to continue to deduct out-of-pocket expenses for their classrooms, and allowing taxpayers in states that have high sales taxes instead of state income taxes to deduct the sales tax instead. Some reports ridiculed a provision that exempts from taxes wooden arrows for children.

MCCRERY: The fact is that boy scouts and camps all over the United States use these wooden arrows for practice, for archery practice and so forth, and the instruction of archery.

ANGLE: The tax was intended for professional bows and arrows, not those used to teach boy scouts but an earlier effort to change the law inadvertently saddled 30-cent arrows for children with a 39-cent tax, thereby doubling the price, a mistake the extender package fixes.

MCCRERY: While some may look at this and say oh, that’s terrible, when in fact, it’s good tax policy.

Shorter version: It’s the Tax Extenders Bill.

The Senate convenes at 10 a.m. At National Review Online, a report from Senate staff:

The structure is this:

The Senate will call up H.R. 1424, the text of which will be substituted with the economic rescue plan (a Dodd amendment which must have the consent of both the Majority and Minority Leaders). The only other amendment in order will be a Sanders amendment that will be handled by a voice vote.

The bill will be subject to a 60-vote threshold for passage.

Another note from an aide: “it will be the economic rescue plan, plus the FDIC improvement, plus the tax relief extension bill that we passed earlier this month ($100 million in net tax relief that’s being stalled in the House).”

The Washington Post reports much the same.

From CQ, “House Sticks with Offsets for Tax Extenders“:

The House is drawing the boundaries of a tax fight with the Senate as it prepares to pass a $61.7 billion bill that shrinks the gap between the two chambers’ positions but leaves major unresolved differences.

The continued stalemate and the apparent lack of negotiations are worrying industry groups that depend on seeing their tax breaks extended. The dispute, over the extent to which Congress should offset the cost of extending expiring tax breaks, raises the possibility that many popular tax provisions will expire.

Bloomberg, “House delays vote on tax measure.”

WASHINGTON – The US House put off until at least today a vote on a tax measure that is different from a Senate-passed bill and could jeopardize enactment of solar energy tax breaks and other expiring incentives.

House Ways and Means chairman Charles Rangel urged the Senate to not miss the opportunity to make measure into law.

The White House Office of Management and Budget issued a statement warning of a veto by President Bush because the House measure raises taxes and separates an alternative minimum tax proposal in the Senate package from the main bill.