The U.S. House approved legislation to extend unemployment insurance, restore some tax breaks and raise taxes on managers of buyout funds and other investment partnerships.
The U.S. House approved legislation to extend unemployment insurance, restore some tax breaks and raise taxes on managers of buyout funds and other investment partnerships.
Lawmakers voted 215-204, largely along party lines, for the legislation costing about $112 billion. The Senate plans to consider the plan during the week of June 7 after lawmakers' Memorial Day recess.
“It's a good bill for jobs, it's a good bill for closing tax loopholes, it's a good bill for dissuading people from taking jobs overseas,” Majority Leader Steny Hoyer, a Maryland Democrat, said on the House floor before the vote.
The plan would continue funding for extended unemployment benefits through Nov. 30 and renew a variety of tax cuts for businesses and individuals. The House also voted 245-171 to give doctors a 19-month reprieve from scheduled cuts in their reimbursements from the Medicare program.
Before the Senate acts next month, some jobless benefits will begin to expire May 31, at a time when the national unemployment rate remains near 10 percent. A record 45.9 percent of the jobless have been out of work for 27 weeks or more. When the payments lapsed earlier this year during a dispute over their extension, lawmakers made new benefits retroactive.
The legislation drops funds for extended health insurance subsidies for jobless workers while retaining dozens of tax breaks for businesses.
The Congressional Budget Office said the bill would add $54.2 billion to a deficit projected to reach $1.5 trillion this year.
To help cover its cost, the measure would raise tax rates on some income for managing partners at buyout firms, venture capital funds and real estate partnerships by about $17.7 billion over 10 years. It also would raise taxes by an estimated $14.5 billion on global operations of U.S.-based companies such as International Business Machines Corp.
Michigan Representative David Camp, a Republican, said those taxes shouldn't be imposed permanently to pay for extension of temporary policies.
“This bill has nothing to do with jobs,” Camp said. “Virtually every business group is opposed to this package,” he added, citing the U.S. Chamber of Commerce and the National Federation of Independent Businesses.
Democratic leaders secured the votes needed to pass the bill by scaling back a larger measure to appease fiscally conservative party members concerned about voting for deficit spending just months before November's congressional elections.
Lawmakers dropped an extension of health insurance subsidies for jobless workers as well as higher matching funds for state-run health programs such as Medicaid.
Lawmakers delayed until Jan. 1, 2011, a proposed tax increase on profit shares paid to managers of buyout funds and other financial partnerships. Earlier, the increase was to be applied to income earned this year.
Texas Representative Henry Cuellar, a member of the fiscally conservative Blue Dog Coalition said the changes helped switch his vote from “no” to “yes.”
“The bigness issue and the deficit issue for me has been addressed to a much more acceptable level,” Cuellar said.
The legislation would provide subsidies for local infrastructure projects by extending the Build America Bonds program. It also would require retirement plan administrators to disclose more information about fees charged to 401(k) retirement accounts and give companies with underfunded pension funds more time to make those accounts solvent.
Approval of the legislation would end a long battle over Democrats' efforts to increase taxes on so-called carried interest paid to executives at private equity, venture capital and real estate firms. The House has voted three times in three years to raise the levy, only to see the measure stall in the Senate. Lawmakers said it has broader support this year amid pressure to avoid adding to the deficit.
Carried interest is the share of profit that fund managers are paid as part of their compensation. That share often qualifies for capital gains tax rates of 15 percent; the bill would eventually subject three-quarters of the income to ordinary tax rates of more than 40 percent.
The legislation would spend $23 billion to give doctors a 2.2 percent increase in Medicare reimbursement rates this year and a 1 percent rise next year. Physicians were facing a 21 percent cut in their payment rates this year and a 6 percent reduction next year.
Other provisions would make it harder for lawyers and other professionals to avoid Social Security and Medicare taxes by organizing what are known as S corporations. Oil companies would be another loser under the bill, which would increase to 34 cents from 8 cents a per-barrel tax to raise $12 billion.
Senate Finance Committee Chairman Max Baucus said earlier this week that Democrats in his chamber will have the votes to approve the legislation, offering assurances to House members concerned about voting for a bill that may not become law.
“We're ready,” said Baucus, a Montana Democrat. “It will pass the Senate.”
