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Tax Changes May Be Added to Democrats’ COVID-19 Package

Posted on Feb. 3, 2021

Both Democrat-controlled chambers of Congress voted to move ahead with a parliamentary procedure that would require a simple majority to pass a COVID-19 relief package that may see some late tax additions.

Democrats proceeded quickly February 2 to lay the groundwork for a vote on a relief measure that would aid low-income households, help states, and expand the Paycheck Protection Program. 

The parliamentary procedure known as budget reconciliation would bypass the Senate’s usual 60-vote requirement and allow for a simple majority to approve a $1.9 trillion package. Although Republicans complained about being left out of the process, Democrats are adamant that a bold proposal is needed to deal with the economy.

“Time is a luxury our country does not have, and let me be very clear . . . We are not going to dilute, to dither, to delay,” Senate Majority Leader Charles E. Schumer, D-N.Y., said. He later told reporters that President Biden encouraged lawmakers in a call to draft a “big, bold” package. 

The Senate and House each voted along party lines to start debate on the framework of the relief bill that will be cobbled together by House and Senate committees over the next two weeks.

That will give some lawmakers who are trying to offer tax policies a chance to make their case. While there are set policies to be included in the relief package, such as relief checks to taxpayers and increased aid to states and schools, the exact composition of the bill remains murky. 

Potential Tax Additions 

A group led by House Ways and Means Committee member Lloyd Doggett, D-Texas, and Senate Finance Committee member Sheldon Whitehouse, D-R.I., wants leadership to reinstate the limitation on excess business losses for passthrough businesses and to restrict carrybacks. The NOL limitations were temporarily repealed in the Coronavirus Aid, Relief, and Economic Security Act (P.L. 116-136), and Democrats claim that the measure has helped wealthy taxpayers to the detriment of average taxpayers. 

In a letter to Schumer and House Speaker Nancy Pelosi, D-Calif., Doggett and Whitehouse, along with over 100 Democrats, said the repeal would save more than $250 billion that could be used to help ordinary Americans. 

Reinstatement of the limitation was included in both versions of the Health and Economic Recovery Omnibus Emergency Solutions Act introduced by House Democrats last year.

Lawmakers may also push leadership to include a measure repealing the $10,000 state and local tax deduction cap. House Ways and Means Committee member Thomas R. Suozzi, D-N.Y., told reporters the week of January 25 that he would speak with fellow lawmakers about eliminating the cap. Suozzi will have a powerful ally in Schumer, who has voiced his support for repeal of the cap.

But that bill, which would benefit mostly wealthier taxpayers, may not have the same appeal as one introduced by Senate Democratic Whip Richard J. Durbin of Illinois and Rep. Cynthia Axne, D-Iowa, to remove taxes on up to $10,200 in unemployment aid for 2020.

Lawmakers would also be able to introduce amendments to the reconciliation package with their preferred bills.

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