House Passes Scaled-Back Jobs BillMay 28, 2010 - by Donny Shaw
After cutting COBRA health care benefits for the unemployed and Medicaid funds for states with budget problems, the House has finally passed their economic recovery bill, the American Jobs and Closing Tax Loopholes Act of 2010.
But they are a day late. The Senate adjourned this afternoon and won’t be back to vote on the bill until Monday, June 7. The current unemployment benefits extension that was approved by Congress in April is set to expire on June 2. According to the Department of Labor, more than 300,000 unemployed people will exhaust their current tier of benefits and be left without a lifeline by the time the Senate gets back to take up the bill.
Senate Majority Leader Sen. Harry Reid [D, NV] said today that the Senate will begin debating the House-passed bill first thing when they return on Monday morning.
Finance Committee Chairman Sen. Max Baucus [D, MT] said earlier this week that the Senate had the votes to pass it. “We’re ready,” he said “It will pass the Senate.” Still, it could take several days or more for the Senate to finish the debate and send the final bill to President Obama to be signed into law.
House Democrats ended up splitting the bill into two pieces in order to find the votes they needed to pass it. One piece, containing a 19-month “fix” of a 21% payment cut doctors are scheduled to face under an automatic Medicare reimbursement rate formula, passed by a vote of 241-171. The second piece, including a 6 month extension of the filing deadline for extened unemployment benefits and a number of stimulative tax credits and programs, barely squeaked by on a vote of 215-204. Vote details on both roll calls will be online imminently and I’ll update this post when they are.
The second piece of the broken-up bill — the piece with the unemployment benefits — would also close several big tax loopholes benefiting wealthy individuals and corporations. The first would increase the tax rate that hedge fund managers have to pay, which is something the industry has been lobbying hards against for years. Because of an error in the tax code, hedge fund managers’ income is currently taxed at the lower capital gains tax rate instead of the regular income tax rate, which is higher. The bill doesn’t close the loophole entirely, though — it would tax 60% of hedge fund manager income at the regular rate and let them continue paying the discount rate on the rest. Other revenue-producing tax provisions in the bill include the closing of a corporate tax loophole that allows American companies to operate offshore without paying taxes to either the U.S. or the foreign country, and preventing some high-earning service professional from skipping out on Social Security taxes by calling themselves an S corporation.
The second piece of the bill is largely paid for by revenues from these tax provisions, while the Medicare payment fix in the first piece is not paid for and would add $23 billion to the deficit over the next ten years. The fact that the first piece passed the House by a comfortable margin while the second piece passed without a single vote to spare is testament to the difficulty Congress has approving revenue raisers over the opposition of private interests.