Bloomberg News

Commuters Pinched on Tax Break as Congress Deadlock Lasts

January 06, 2014

Commuters Pinched on Tax Break as Deadlock Persists in Congress

Commuters at Grand Central Terminal in New York City on Sept. 19, 2013. Photographer: Ron Antonelli/Bloomberg

For a little while anyway, Americans are feeling the effects of a deadlocked Congress.

A commuter tax break worth as much as $115 a month for mass-transit users expired on Dec. 31. It was among dozens of tax benefits that ended last year even as Republicans and Democrats cobbled together a year-end budget deal.

It’s the kind of routine legislating that at times eluded Congress last year. With lawmakers returning to Washington today, they’re looking to see whether lawmakers will be any more productive -- or see any less partisan confrontation -- in 2014 than in 2013.

“It’s the question on all our minds,” said Maryland Representative Chris Van Hollen, the top Democrat on the House Budget Committee. “The jury’s still out.”

The first fight could occur over a plan to extend long-term unemployment benefits for 1.3 million Americans, with a vote as soon as today. By Jan. 15, lawmakers also must act on bills funding thousands of federal programs. As early as next month, they may need to raise the nation’s borrowing authority.

Once the spending plan is behind them, look for both parties to focus on putting down political markers heading into the 2014 election, with legislation appealing to their most loyal supporters and populist pitches to undecided voters.

Grand Bargain

House Republicans are taking action to dismantle the Affordable Care Act, also known as Obamacare. Senate Democrats will offer bills to increase the minimum wage to $9.80 an hour, along with the expanded unemployment insurance package.

Off the table for both parties are visions of major bipartisan deals, including a revision of the U.S. tax code, a jobs programs and a grand bargain to reduce the budget deficit.

The most ambitious legislative achievements probably will be to avoid a default on the nation’s debt, change intelligence-gathering laws and possibly renew U.S. farm policy for five years.

Both parties usually come together each year at some point to approve the commuter tax break and others -- tax provisions valued at $50 billion a year. Most of the items, such as the tax credit for research and development, can easily be restored retroactively and handled on tax returns filed in 2015.

Mass-transit users, who receive their tax break monthly, are harder to make whole. In other words, commuters lose the cash until Congress acts.

Commuters can set aside money in tax-free accounts for transit and parking costs each month. The amount was capped at $245 a month in 2013. While the parking benefit increased to $250 for 2014, the transit benefit dropped to $130, pinching commuters in New York, Washington and elsewhere.

Immigration Revisions

A banner accomplishment would be advancing a series of bills aimed at revamping U.S. immigration laws.

These modest goals may prove unattainable as Congress works against the backdrop of the Nov. 4 congressional elections. Once lawmakers finish votes on appropriations bills and the debt ceiling, there’s a narrow time frame before they scatter to their districts to shore up re-election campaigns.

Representative James Moran, a Virginia Democrat known for working across the aisle, said he doesn’t expect the year-end show of bipartisanship that helped ease automatic spending cuts to change a hostile atmosphere in the Republican-led House.

“The House is the problem, there’s no question about it,” Moran said Jan. 3 in a Bloomberg Television interview. He cited Tea Party-aligned lawmakers who want to further cut federal spending as the economy struggles to recover. “It’s like having a board of directors whose intent is to make the company go bankrupt,” he said.

Funding Agencies

Even so, Congress probably will reach consensus on funding a majority of federal agencies, Moran said. “I fully expect that we will be able to pass most of the appropriation bills by Jan. 15,” he said.

Other portions of the so-called omnibus spending bill may be “too problematic” to be resolved by the deadline, he said, citing provisions that fund implementation of the health care law, federal education programs and the Environmental Protection Agency and foreign aid funding.

The bigger question is whether the need to raise U.S. borrowing authority will lead to another showdown, as it has several times over the past three years.

Republicans including Wisconsin Representative Paul Ryan, who chairs the House Budget Committee, have said they want concessions, without being specific, in exchange for raising the debt ceiling. President Barack Obama has said he won’t negotiate over paying the nation’s bills.

Avoid Confrontation

If Congress and the White House can avoid another confrontation, “that provides a level of security, together with a two-year budget agreement, that would really bode well for the economy in the coming years,” said Thomas Mann, a congressional scholar at the nonpartisan Brookings Institution in Washington. “That’s the biggest thing.”

Beyond these must-do items, there is no consensus among House and Senate leaders on legislative priorities.

Senate Majority Leader Harry Reid plans to take up a bill as early as today written by Republican Dean Heller of Nevada and Democrat Jack Reed of Rhode Island to extend expanded benefits for jobless Americans another three months. It’s something House Republicans have blocked.

Democrats plan to highlight families that are struggling without the extension. They held a conference call on Jan. 3 to make the economic case for continuing the benefits for three months.

200,000 Jobs

“Once it’s debated and the stories of people become more and more known that’s going to move the mountain,” said Michigan Representative Sander Levin, a Democrat. Not renewing the benefits will cost the economy 200,000 jobs this year, according to the Congressional Budget Office.

Meanwhile, Republican House Speaker John Boehner is planning to immediately return to a Republican effort to dismantle the president’s health care law.

In a memo to Republicans last week, House Majority Leader Eric Cantor said he would schedule a vote on a proposal to require the government to notify individuals if their personal information has been compromised on the healthcare.gov website.

“It is my intent to schedule legislation on this topic when we return next week,” Cantor wrote. “In the coming weeks, we will continue to address other areas where greater transparency is demanded, including the disclosure of reliable and complete enrollment data.”

‘No Change’

Democrats said the scheduled vote is a disappointment. “It is clear that the new year has brought no change in heart for House Republicans,” Drew Hammill, a spokesman for House Minority Leader Nancy Pelosi, said in a statement. “They continue to remain intent on undermining or repealing the Affordable Care Act at every turn.”

The continued battle over Obamacare as Democrats hone in on their economic equality message will leave little room for major legislation such as tax-code changes.

Congress let 55 tax breaks lapse Dec. 31, including the research and development tax credit used by companies such as Intel Corp. (INTC:US), an international tax provision backed by General Electric Co. (GE:US) and the ability for motorsports racetrack owners to take faster write-offs for improvements.

The top tax writers in Congress, Republican Representative Dave Camp and Democratic Senator Max Baucus, resisted attempts to extend the breaks during 2013 as they tried to build support for the biggest tax code changes since 1986.

Now, with Baucus’s probable departure to become Obama’s ambassador to China, the momentum for major tax changes is waning. Baucus will be replaced by Oregon’s Ron Wyden as chairman of the Senate Finance Committee. Wyden supports extending at least some of the breaks, particularly for renewable energy.

That won’t necessarily be easy, because of the objections from House Republicans and debates over whether and how to offset the lost revenue from reinstating the breaks.

To contact the reporter on this story: Heidi Przybyla in Washington at hprzybyla@bloomberg.net

To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net


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