The lame-duck Congress departed for its Thanksgiving recess with no clear path in sight for dealing with pressing tax issues: extension of the Bush tax cuts; resolving the estate tax problem; patching the alternative minimum tax (AMT); and dealing with extenders, i.e., deciding whether to retroactively extend some or all of the tax provisions that expired at the end of 2009 (including the research credit). What’s more, it looks as if the lame-duck Congress may not resolve these issues until the very last minute, i.e., right before Christmas. On November 18, Senate Finance Chair Max Baucus (D-MT) told members of the press to “get your snow boots on.”
The thorniest issue is the expiring Bush-era tax cuts. The Democrats (and the Administration) want to extend the tax cuts for “non-high-income” taxpayers only. The Republicans want to extend the tax cuts for everyone. (Note: For an article the discusses the pros and cons of raising the tax rates on high-income taxpayers as highlighted in a recent Congressional Research Service (CRS) Report, see RIA Newsstand e-mail 11/11/2010.) The problem is that neither party has the votes to prevail. That inevitably will lead to a compromise of some sort. One possibility is an across-the-board, but temporary, extension of the Bush-era tax cuts for individuals.