The new Congress is predicted to act quickly in January to pass stimulus legislation that President Barack Obama to sign when he takes office, according to a tax aide to a Republican member of the Senate. A second round of stimulus checks is unlikely, according to the aide. However, there are proposals for a payroll tax holiday.
Stimulus proposals
Net operating loss (NOL) relief, such as an increase in the carryback period from two years to at least four, is a top contender on the list of probable tax relief. Additionally, some may proposed a 10- to 15-year carryback period. While there is no discussion of a capital loss carryback for individuals, there is some support for increasing the current $3,000 limit on deductible losses. There is also support for a permanent research credit.
Senate Finance Committee (SFC) Chairman Max Baucus, D-Mont., wants the committee to have a role in crafting the stimulus package, which would include a tax element if Baucus gets his way. For their part, many Republicans would like to see bonus depreciation extended and expanded
The stimulus bill is not likely to be supported by pay-as-you-go (PAYGO) rules for offsets. As such, some Senate members may look to expand the bill's scope to include middle-class tax cuts or estate tax relief. It is not clear, however, whether Congress is ready to move on broader tax reform.
Other measures
Congress is anticipated to shift its focus to reining in deficits after the economy begins to improve, the aide predicted. Congressional Blue Dogs are calling for a statutory PAYGO requirement, rather than just an in-house rule. While Congress may impose some discipline in crafting tax bills, Congress is eventually going to start looking for revenue, the aide added. This could come from tax increases, changes to the carried interest rules, or codification of the economic substance doctrine. While both sides support estate tax reform, they differ on exemption levels and rates.
Congress is also ready to start talking about healthcare reform, the aide added. Reform could include changes to the health insurance exclusion, including one proposal for a cap that would raise $350 billion over 10 years.
