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Internet sales tax on the move

On Wednesday, internet sales tax legislation – known as the Marketplace Fairness Act – passed a procedural hurdle with 75 votes in the Senate. The bill got another important boost on Wednesday when the Congressional Budget Office (CBO) ruled that the bill would not increase federal tax revenue. This finding by CBO is important because all legislation that raises revenue is supposed to originate in the House. The CBO ruling clears the way for the Senate to act first.

Senate Majority Leader Harry Reid (D-NV) is a champion of the legislation and used a procedural tactic to bypass the Senate Finance Committee – chaired by Senator Max Baucus (D-MT) who is an outspoken critic of the bill. Although the Wednesday procedural vote and the CBO ruling cleared the way for final passage, the Senate delayed final action on the legislation until May 6. 

There is companion legislation in the House, but House leadership appears in no rush to move the legislation in the lower chamber.

Immigration reform in the wake of Boston

In the wake of the bombings in Boston, perpetrated by two foreign born individuals residing legally in the U.S., some opponents of comprehensive immigration reform have argued that the brakes should be applied on moving forward. Reform opponents have raised questions about whether or not comprehensive immigration reform would put American citizens at greater risk. Senator Chuck Grassley (R-IA), an outspoken opponent of immigration reform, has argued that since the bombings were perpetrated by immigrants who were living legally in the U.S., new legislation should be delayed until the failures of the current system can be fully understood.

On the other hand, supporters of comprehensive immigration reform have argued that the Boston bombings are proof that we need to make changes to our immigration system. At a Senate hearing, Homeland Security Secretary Janet Napolitano, said she believed changes in our immigration system – such as electronically readable passports – would have aided authorities in preventing the tragedy.

While the Boston tragedy provides a new short-term challenge for supporters of comprehensive immigration reform to pass legislation, most analysts believe that what happened in Boston will not have a long-term effect on the immigration reform debate.

Tax reform update: Mortgage interest deduction on the table?

On Thursday, the House Ways and Means Committee held a hearing on the home mortgage interest deduction. The deduction is one of the most popular in the tax code, but does cost the federal government a significant amount of money.

Allowing homeowners to reduce their taxable income by the cost of their interest payments on mortgage loans worth up to $1 million will cost the federal government $379 billion from 2013 through 2017, according to the Joint Committee on Taxation. Only tax breaks for personal savings and employer-provided health insurance are larger.

Advocates of the deduction say that home ownership is the cornerstone of American society and the home mortgage deduction is an important incentive to home ownership. Critics say that in a time of tight federal dollars the deduction is a poor use of federal funds and the deduction disproportionately helps higher income earners. The hearing is the latest step in the ongoing Congressional effort to address comprehensive tax reform.

Banking bill introduced

As expected, this week Senator Sherrod Brown (D-OH) and Senator David Vitter (R-LA) introduced a banking reform bill aimed at financial firms with more than $500 billion in assets. The Brown/Vitter bill would require those firms to hold a minimum of 15 percent capital to cover for potential losses.

Brown and Vitter, who come from very different ends of the political spectrum, argue that this requirement protects taxpayers from being on the hook when “too big to fail” institutions are faced with steep losses.

The bill also requires mid-sized and regional banks to hold eight percent in capital to protect against losses. This eight percent is down from the 10 percent requirement that was in a draft version of the bill that leaked out earlier this month.

Analysts, and even supporters of the legislation, admit that the bill faces long odds of becoming law anytime soon.

Baucus to focus on tax reform

Senate Finance Committee Chairman Max Baucus (D-MT), who on Tuesday announced his plan to retire in 2014 (see story in the Political Bits section), is making comprehensive tax reform his top priority before he leaves the Senate. Baucus, who chairs the Senate Finance Committee, said he hopes to complete an overhaul of the tax code before the end of his term.

Baucus told reporters this week that the imminent expiration of the debt-ceiling increase presents him and his colleagues in the Senate with an opportunity to move on comprehensive tax reform, “[t]here are ... the potential beginnings of a solution here. We are thinking that through in my office right now."

Senate acts to stop FAA furloughs 

For many, the effects of sequestration are being felt for the first time. Many airports experienced significant flight delays this week after the sequester-related furlough of air traffic controllers occurred. Senator Jay Rockefeller (D-WV) and Senator John Thune (R-SD) wrote to Transportation Secretary Ray LaHood and Federal Aviation Administration (FAA) Chair Michael Huerta urging action to end the furloughs, saying that the move raised “serious safety and operational issues.”

Both LaHood and Huerta responded that they had no choice, absent action by Congress, to prevent the air traffic controller furloughs. On Thursday evening, the Senate passed (S 853) by unanimous consent, which will allow LaHood to transfer up to $253 million from other unspent FAA accounts – including unspent airport improvement grants – to mitigate furloughs for air traffic controllers. The House will vote on this measure Friday under suspension of the rules, an expedited procedure that requires a two-thirds majority and prohibits  amendments. The House does not expect significant opposition, and this legislation could be on the President's desk for his signature as early as Friday.   

Political Bits:

House

South Carolina 1st Congressional District Special Election: A poll released this week showed former South Carolina Governor Mark Sanford (R) trailing Democratic nominee Elizabeth Colbert-Busch in the special election race in the solidly Republican South Carolina 1st Congressional District. Sanford’s political comeback hit a roadblock when it was revealed that he had trespassed on his ex-wife’s property in violation of their divorce agreement.

Senate

Arkansas: New York City Mayor Michael Bloomberg’s group, “Mayors Against Illegal Guns,” is seriously considering a months-long television, radio, and direct-mail campaign against Senator Mark Pryor (D-AR), one of four Democrats who opposed expanding a background check for guns. Pryor is up for re-election in 2014 and is considered one of the most vulnerable Democratic incumbents.

Hawaii: Rep. Colleen Hanabusa (D-HI) will mount a primary challenge to current Hawaii Senator Brian Schatz (D). Hanabusa’s primary challenge was immediately praised by Democratic women’s groups like EMILY’s List. The winner of this primary will be the prohibitive favorite in the 2014 general election in deeply blue Hawaii.

Montana: Long-time Democratic Senator Max Baucus, Chairman of the powerful Senate Finance Committee, announced he would not seek re-election in 2014. Republicans are hopeful that Montana will be a prime pick-up possibility, considering the Republican lean of the state, but if former Democratic Governor Brian Schweitzer decides to run, he would be considered the early favorite.

A look ahead:

The House and Senate are not in session next week.

Washington by the numbers:

844 - The number of pages in the current immigration reform bill. That’s 161,346 words—roughly 140,000 if you subtract the numbers on each line, which is still fewer words than a typical John Grisham paperback or most of the Harry Potter books. And it’s a quarter of the number of words in War and Peace.

Washington humor:

“The George W. Bush presidential library opens first week in May, distinguishing itself in that it’s the only presidential library that will have a fixin’s bar.” — David Letterman

 

 

 

 Steven C. LaTourette, President | 202.737.8933

McDonald Hopkins Government Strategies LLC
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