Daily Tax Update - July 22, 2011: Senate Defeats "Cut, Cap & Balance" Plan

SENATE DEFEATS "CUT, CAP AND BALANCE" PLAN --  DEMOCRATS "VOLCANIC" OVER POTENTIAL DEBT DEAL WITHOUT TAX REVENUES:  Today, the Senate defeated the House-passed "Cut, Cap and Balance" deficit reduction plan by a vote of 51 to 46.  The measure needed 60 votes to pass.  After the vote, Senate Majority Leader Harry Reid said that the House Republican "'Cut, Cap and Balance’ (measure) is now over.  It's done, dead."

  • Frustrations continue to mount from both Republicans and Democrats about the impending debt ceiling deadline and the deficit reduction negotiations.  Reports surfaced yesterday that President Obama and Speaker John Boehner had struck a deal in which Obama was willing to accept major spending cuts in exchange for holding off on reforming the tax code until next year as part of a deal to raise the $14.3 trillion debt ceiling.  Democrats balked at any potential agreement that did not include revenues.
  • Earlier today, Boehner said, "Media accounts are speculating about a 'deal' between Republicans and the White House that does not exist.  What does exist is the Cut, Cap, & Balance Act, approved by the House with bipartisan support and the support of the American people.  The Senate should do its job, listen to the people, and pass it today."  A House vote on a debt ceiling plan could occur by Wednesday.  Boehner also said today, "Frankly, we are not close to an agreement.  I would just suggest it is going to be a hot weekend here in Washington, DC."
  • Yesterday, Senate Majority Leader Harry Reid asked OMB Director Jacob Lew, "I’m the Senate majority leader — why don’t I know about this deal?"  Lew replied:  "If there’s a deal, then the president doesn’t know about it, the vice president doesn’t know about it and I don’t know about it.  What I have to say is this.  The president always talked about balance.  There has to be some fairness in this.  This can’t all be cuts.  There has to be some revenues.  The caucus agrees with that.  I hope the president sticks with that, and I am confident he will."  Today, Reid said, "The path to avert default now runs through the House of Representatives. We in the Senate must wait for them." 
  • Sen. Barbara Mikulski (D-MD) relayed that yesterday’s reaction from the Senate Democratic luncheon with Lew was "volcanic" over the possibility that any budget deal would not include new revenues.  Mikulski said, when "we heard these reports of these mega-trillion-dollar cuts with no revenues, it was like Mount Vesuvius. . . . Many of us were volcanic."
  • House Democratic Whip Steny Hoyer also condemned any agreement that did not include new revenues.  Hoyer said, "I’ve said that we need revenues if we do a deal."
  • House Speaker John Boehner expressed frustration yesterday about the negotiations.  Boehner said, "There is no deal.  No deal publicly.  No deal privately. There is absolutely no deal.”  Boehner also said that the negotiations have “been driving me right up a wall."
  • Sen. Dick Durbin, who is a member of the Senate’s bipartisan Gang Of Six, also expressed concern over the Senate’s ability to pass a deal without tax revenues.  Durbin said, "It would have a very difficult time passing the Democratic Senate.  I’m looking for balance, and balance means revenues as well as spending cuts."
  • During an interview scheduled to air this weekend, House Ways and Means Chairman Dave Camp predicted that Congress and President Obama would reach an agreement on the debt ceiling.  Camp said, "I think [the deal will] have to have the spending reductions and some of the structural reforms that we’ve been looking for."  Camp also said that he opposed an overhaul of the tax code that would raise revenue, although he stated in a later interview that tax reform would still be possible even with a revenue target and didn’t rule out moving tax changes with a higher revenue target as part of a broader bipartisan deficit-reduction package.  On the issue of repatriation, Camp said he doesn’t favor a stand-alone repatriation effort:  "I think repatriation is best not done as a one-off."  Camp added that without a broader tax reform overhaul, "in a few short years, you have money stranded overseas that’s being invested there, not here.  We want that money invested here so those plans and those high-value jobs that go with those factories and plans and structures are in the United States, not overseas."

IRS NAMES CORWIN DEPUTY CHIEF COUNSEL (TECHNICAL):  Today, the IRS announced the selection of Erik Corwin for the position of Deputy Chief Counsel (Technical), effective August 28.  IRS Chief Counsel William Wilkins said, "I am pleased that Erik is joining the Chief Counsel leadership team.  His strong technical background, considerable leadership abilities and his substantial experience working with key stakeholders will make him a great asset to the Internal Revenue Service."

  • Additional information can be accessed here.

TAX BILLS INTRODUCED JULY 21ST:

1. [112nd] H.R.2614 : To amend the Internal Revenue Code of 1986 to allow distributions from retirement accounts to start a business.
Sponsor: Rep Paul, Ron [TX-14] (introduced 7/21/2011) Cosponsors (None)
Committees: House Ways and Means
Latest Major Action: 7/21/2011 Referred to House committee. Status: Referred to the House Committee on Ways and Means.

2. [112nd] S.1397 : A bill to amend the Internal Revenue Code of 1986 to provide for an investment tax credit related to the production of electricity from offshore wind.
Sponsor: Sen Carper, Thomas R. [DE] (introduced 7/21/2011) Cosponsors (9)
Committees: Senate Finance
Latest Major Action: 7/21/2011 Referred to Senate committee. Status: Read twice and referred to the Committee on Finance.

3. [112nd] S.1404 : A bill to amend the Internal Revenue Code of 1986 to increase participation in medical flexible spending arrangements.
Sponsor: Sen Cardin, Benjamin L. [MD] (introduced 7/21/2011) Cosponsors (1)
Committees: Senate Finance
Latest Major Action: 7/21/2011 Referred to Senate committee. Status: Read twice and referred to the Committee on Finance.

INTERNAL REVENUE SERVICE - CIRCULAR 230 DISCLOSURE:
As provided for in Treasury regulations, advice (if any) relating to federal taxes that is contained in this communication (including attachments) is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any plan or arrangement addressed herein.

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