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Senate to Pass Tax Extenders Bill Using Health Care Pay-Fors

The Senate yesterday cleared cloture on the $150 billion dollar tax extender bill, which includes an extension of unemployment benefits and the COBRA subsidy until the end of the year, by a 66-34 vote. Final passage is expected today. And there was much rejoicing in the White House.

Aside from Scott Brown again declining to be #41 by voting for cloture, what’s notable here is that the tax extender bill, if signed into law as is, would doom the health care bill. Sander Levin explains:

Rep. Sandy Levin (D-Mich.), the acting chairman of the House Ways and Means Committee, said a House-Senate conference might be needed on the $138 billion tax extenders bill being debated in the Senate.

One reason would be differences between the House and Senate over how the legislation should be paid for, Levin said Tuesday.

The Senate bill is partially paid for, but uses offsets included in President Obama’s health care proposal. Since offsets can’t be used in two bills, that’s a problem.

There’s a set of revenue offsets that have been thrown into just about every bill in Washington over the last several months, but haven’t passed yet. They include: closing the “black liquor” loophole that allows paper companies to claim an alternative fuel tax credit for using the same energy process they’ve used for decades; and the “economic substance doctrine” to shut down certain abusive tax shelters. Together these raise, or rather save, close to $35 billion dollars; but if they stay in the tax extenders bill, Democrats would have to find that revenue for the health care bill.

These revenue offsets – and they are inadequate to cover the full cost of the tax extenders bill, which means that Blue Dogs will want more of them – could sink the bill entirely. And the clock is ticking – that one-month extension of unemployment insurance and COBRA ends March 31. I suspect a conference committee will throw the lot of these jobs/tax extenders/safety net/revenue ideas into one omnibus mish-mash.

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David Dayen

David Dayen

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