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Tax extenders begin to move

With comprehensive tax reform a non-starter this year, all eyes have been on tax extenders. This week, the Senate Finance Committee took the first step, moving forward with an effort to extend some of the 55 expired or expiring provisions in the tax code for businesses and individuals. Earlier this week, Senate Finance Committee Chair Ron Wyden (D-OR), released a chairman’s mark that proposed extending all but 12 of the 56 tax provisions in question.

Among the provisions not making the cut in Wyden’s two-year extender language—worked out with finance ranking member Orrin Hatch—are write-offs for NASCAR and other race-car tracks, a tax credit for wind energy production (though the wind energy production credit may have the bipartisan support necessary to also get extended), and special “expensing rules” for the TV and film industries. Also chopped was a rule that corporations use to sidestep income tax on transfers of capital among offshore affiliates.

In addition to leaving out some favored tax incentives, some breaks that Wyden and Hatch propose for renewal would be modified. For example, an individual income tax credit for “highway-capable plug-in motorcycles” would be extended for two years. But that provision is written to no longer include three-wheel vehicles, such as golf carts.

Overall, the package as proposed would extend more provisions than it would leave behind. Without any changes, it would cost an estimated $67.3 billion over 10 years.

Provisions to be extended for two years include federal rum rebates to Puerto Rico and the Virgin Islands; a general sales-tax deduction that mainly benefits those in states without an income tax like Florida and Texas; and rules allowing owners of racehorses to depreciate those investments over a three-year cost-recovery period.

Also included are extensions of deductions related to corporate research and development; giving to public charities, expenses by teachers for books and other nonathletic supplies, special tax treatment for military basic housing allowance, and credit for certain railroad expenditures made to maintain tracks.

These “temporary” provisions have over the years been almost routinely renewed, often on a retroactive basis.

Renewal of most of these items is likely to occur again this year—though Republicans in the House, led by retiring Ways and Means Committee Chairman Dave Camp, have promised a stricter “policy-by-policy” review.

Indications are that action on a bill in the House could be put off until after the November elections, perhaps in a lame-duck session. It could be one of Camp’s last acts as a chairman who tried, but failed, to get action on a tax-code overhaul.

Ryan budget unveiled

Rep. Paul Ryan (R-WI) introduced his annual Republican budget on Wednesday, which was formally adopted by the House Budget Committee which Ryan chairs. Ryan’s proposal brings the federal budget into balance in 10 years with $5.1 trillion in spending cuts.

The Ryan budget, which has annually caused heartburn for some Republicans in Congress, has no practical application considering that the top-line spending number has already been set under the two-year “Ryan-Murray” agreement that both chambers passed earlier this year.

The Ryan budget is intended, according to Ryan himself, to be a “roadmap” that will show voters the House Republican’s long-term vision for the country. This vision includes an embrace of dynamic fiscal scoring, a full repeal of the Affordable Care Act, as well as cuts and changes to Medicare, Medicaid, food stamps, and other social safety-net programs.

Ryan proposes turning more control of Medicaid and food stamps over to states—an annual proposal that some say would save money but has been a popular election-year target for Democrats.

The plan also retains Ryan’s idea for each Medicare recipient to choose from a list of coverage options and payments that would “best suit his or her needs,” and then payments would be made directly to that plan. Longer term, the proposal discusses giving seniors who first become eligible when turning 65 on or after Jan. 1, 2024, a choice of selecting private plans alongside the traditional fee-for-service Medicare program.

The only part of the budget not under the knife in the Ryan proposal is defense spending, which actually is increased under his plan.

Some 40 percent of the $5.1 trillion in savings envisioned in Ryan’s “bigger picture” of the next 10 years is depicted as coming through a full repeal of the Affordable Care Act. In all, his plan would spend about $42.6 trillion over 10 years, compared with about $47.8 trillion under existing policies.

It is unclear at this point whether the Ryan budget will ever see a vote on the House floor, though Ryan has said it could move as early as next week. The Ryan budget could face opposition from conservatives who say it doesn’t go far enough and moderates who are worried that it could be an election year albatross in their districts.

Click here to view the Washington Business Brief video, Tax Extenders, Ryan Budget and Healthcare.

Supreme Court strikes blow to campaign finance reform

On Wednesday, the Supreme Court – in a 5 to 4 ruling – struck down aggregate donation limits. The ruling doesn't mean people can give unlimited amounts of money to candidates; but it did strike down aggregate caps on the total amount of money an individual can give to political campaigns, Political Action Committees (PACs) and parties.

The ruling raises the possibility that the next step for those opposed to campaign finance regulations will be to contest the legality of individual donation limits, a bedrock principle of the current system.

The country's once-robust campaign finance rules and regulations—a system devised in the early 1970s following the Watergate scandal—have been increasingly dismantled by the Court. The Supreme Court has not voted to keep a campaign finance limit since 2006, when Justice Samuel Alito gave the conservative wing its current majority. The Court's Citizens United decision, along with a handful of other rulings, paved the way for the proliferation of outside groups known as super PACs that can receive unlimited contributions from individual donors. In some cases, if the group is designated as a nonprofit organization, it is able to keep its donors anonymous.

Good news for supporters of the Affordable Care Act

After months of bad news, supporters of the Affordable Care Act got some good news this week. First, came news that 7.1 million Americans had signed up for healthcare under the law - a number that dramatically exceeded expectations in Washington.

Next, came the news that more than five million Americans have gained health insurance since September.

A new study finds 5.4 million uninsured Americans have gained health coverage since September. It is the first estimate of how many of the nation's uninsured are benefiting from the Affordable Care Act.

The percent of uninsured Americans fell to 15.2 percent in March from 17.9 percent in September, the study says.

The data comes from the latest Health Reform Monitoring Survey, funded by the Robert Wood Johnson Foundation, an organization focused on public health, and conducted by the Urban Institute, a social- and economic- policy think tank.

Because 17.5 percent of Americans were uninsured as of December, the researchers attribute the significant drop in the percent uninsured to ramped-up Obamacare enrollment in early 2014.

The total number of uninsured who gained coverage in the Affordable Care Act's health insurance exchanges could go up, because most of the survey was completed in early March and does not include the last-minute surge of sign-ups, the researchers added.

Transportation in focus

Ryan budget makes deep cuts to transportation

Rep. Paul Ryan’s (R-WI) budget came under attack from many corners this week, including from transportation advocates who pointed out the serious cuts to transportation funding in his budget.

Congressman Ryan’s budget balances in 10 years and would cut $5.1 trillion from the federal deficit over the next decade.

Many non-defense discretionary spending areas get a serious hair-cut in the Ryan budget and transportation is no exception. The Ryan budget would eliminate funding for Amtrak and make cuts in funding for the Transportation Security Administration (TSA).

The Ryan budget would also require Department of Transportation (DOT) to reduce its spending on road and transit projects to the amount of money that is brought in by the 18.4 cents per gallon federal gas tax unless transfers from other areas of the federal budget are offset with additional spending cuts.

The current 18.4 cents per gallon gas tax only brings in about $34 billion per year, and the Congressional Budget Office has forecasted that the DOT’s Highway Trust Fund will go bankrupt this fall without an additional infusion of cash.

While transportation advocates were critical of the Ryan budget, it is worth noting that the proposal is a purely symbolic one since the House and Senate already agreed to a two-year budget top line. It isn’t even clear yet whether 218 votes exist in the House for the Ryan budget.

Full list of Ryan budget transportation provisions

Eliminate funding for Amtrak operating subsidies. The budget supports eliminating operating subsidies that have been insulating Amtrak from making the structural reforms necessary to start producing returns. The 1997 Amtrak authorization law required Amtrak to operate free of subsidies by 2002. The budget supports continued reforms for Amtrak as well as reductions in headquarters and administrative costs for agencies.

Reductions in Transportation Security Agency funding. Enhanced operational efficiencies can be obtained without compromising security priorities. Recently, wasteful procurement practices led to over $185 million in screening equipment sitting unused in expensive storage facilities. Moreover, TSA has denied applications from airports to opt out of federal screener operations without adequate justification. Applications for private screening that meet security requirements and could improve cost-efficiency goals should be approved expeditiously.

Prioritize rail safety. The budget supports the vital role of the Federal Railroad Administration in ensuring freight and passenger-rail safety, while reducing spending in non-essential transportation programs.

Ensure solvency of the Highway Trust Fund. The budget recognizes that the Highway Trust Fund is projected by Congressional Budget Office (CBO) to run negative balances in fiscal year 2015 under current levels of spending. By existing law and cash-management practices, the Department of Transportation would need to slow down or reduce spending upon the exhaustion of trust-fund balances. Congress needs to reform this critically important trust fund to put it on a sound financial footing without further bailouts that increase the deficit.

The budget recommends sensible reforms to avert the bankruptcy of the Highway Trust Fund by aligning spending from the Trust Fund with incoming revenues collected. The budget also includes a provision to ensure any future general fund transfers will be fully offset, while at the same time providing flexibility for a surface-transportation reauthorization that does not increase the deficit. The budget includes a reserve fund to provide for the adjustment of budget levels for consideration of surface-transportation legislation, as long as that legislation is deficit neutral.

Further, the budget recognizes the need to explore innovative financing mechanisms to support surface-transportation infrastructure and safety programs. For example, with further public-private sector partnerships demonstrated in the Transportation Infrastructure Finance and Innovation Act (TIFIA) program. The budget also recommends giving states more flexibility to fund the highway projects they feel are most critical. One possible reform could include a pilot program for states to fund their transportation priorities with state revenues, opt out of the federal gas tax, and forgo federal allocations.

Phase out subsidies for Essential Air Service. Essential Air Service (EAS) is a classic example of a temporary government program that has become immortal. EAS funding, originally intended to provide transitional assistance to small communities to adjust to the airline deregulation in the late 1970s, has not only continued, but has grown rapidly in recent years.

Political bits

House

California 52nd Congressional District: Former San Diego City Councilman Carl Demaio (R-CA) announced that he raised over $410,000 in the first quarter of 2014 and has $1.2 million in cash.

Michigan 4th Congressional District: Rep. Dave Camp (R-MI), the outgoing chair of the powerful Ways and Means Committee, announced he would not run for re-election in November. Mitt Romney carried this district with 54 percent in 2012.

Michigan 8th Congressional District: Rep. Mike Rogers (R-MI) announced he will not seek another term in Congress. Rogers’ district leans Republican.

North Carolina 3rd Congressional District: The Emergency Committee for Israel released a TV ad attacking U.S. Rep. Walter B. Jones, Jr. (R-NC) for his positions on Israel and Iran. Jones is facing a primary challenge from Taylor Griffin (R-NC).

Senate

Georgia: Michelle Nunn (D-GA), daughter of former U.S. Senator Sam Nunn (D-GA), released a TV ad highlighting her work at the Points of Light Foundation and George H.W. Bush.

Minnesota: According to a new Magellan Strategies poll, Sen. Al Franken (D-MN) leads state Sen. Julianne Ortman (R-MN) 44 to 41 percent.

Mississippi: A pro-Senator Thad Cochran (R-MS) super PAC launched a new ad this week attacking challenger State Senator Chris McDaniel (R-MS) for taking both sides on tort reform and earmarks.

2016

The RNC narrowed the list of cities it is considering to host the 2016 GOP convention to six, and announced Wednesday it is no longer considering Phoenix and Columbus. Cincinnati, Cleveland, Dallas, Denver, Kansas City, and Las Vegas are still in contention to host the convention where Republicans will officially choose their presidential nominee.

Senator Marco Rubio (R-FL) hinted this week if he ran for President in 2016 - as many expect - he would give up his seat in the Senate. Rubio also said he will likely make a decision on a 2016 bid at this point next year.

Scarborough 2016? MSNBC host Joe Scarborough says he is not running for president, but he is certainly starting to look and sound like a candidate. The former GOP Florida congressman was back in South Carolina, speaking to a group of state House Republicans at a Tuesday luncheon. Scarborough also spoke to New Hampshire Republicans last month. 
          


A look ahead            

House 

No hearings scheduled yet

Senate

Wednesday, April 9 – The Senate Judiciary Committee will hold a hearing on Examining the Comcast-Time Warner Cable Merger and the Impact on Consumers at 10:00 a.m. in 226 Dirksen.

Wednesday, April 9 – The Senate Rules and Administration Committee will hold a hearing on Election Administration: Making Voter Rolls More Complete and More Accurate at 10:00 a.m. in 301 Russell.

Washington by the numbers                        

7.1 million - People who signed up for health insurance on HealthCare.gov.

They said what?

“If you don’t have baggage they’ll create baggage for you. That’s politics in America today.” -- New Jersey Gov. Chris Christie, on why the Bridgegate scandal won’t affect his decision on whether to run for president (New York Daily News)

Washington humor

"The White House says it's surpassed its goal for people enrolled in Obamacare. It's amazing what you can achieve when you make something mandatory and fine people if they don't do it, and keep extending the deadline for months." Jimmy Fallon

  

 Steven C. LaTourette, President | 202.559.2600

McDonald Hopkins Government Strategies LLC
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