–House To Consider $200 Billion Plan To Extend UI, Expired Tax Items
–Senate To Take Up Bill To Fund Iraq and Afghan Wars, Domestic Programs

By John Shaw

WASHINGTON (MNI) – Having spent most of the year focused first on
health care and then on financial regulatory reform, Congress is
expected to shift next week to a host of long deferred tax and spending
programs.

The House next week will take up a nearly $200 billion package of
tax cuts and benefit extensions that was unveiled this week by Senate
Finance Committee Chairman Max Baucus and House Ways and Means Committee
Chairman Sander Levin.

The package would extend about a dozen tax cuts that expired at the
end of last year, expand unemployment benefits, health insurance
subsidies for unemployed workers, and release Medicaid funds to the
states.

Only about $60 billion of the package would be offset. And some of
these offsets are controversial. For example, the package changes the
treatment of carried interest earned by private equity fund managers,
venture capitalists, and real estate investors.

Under the Baucus-Levin plan, instead of being considered as capital
gains, 75% of their carried interest would be treated as ordinary income
for tax purposes. Only the remaining 25% would be taxed as capital
gains.

The package also tries to limit the ability of corporations to use
foreign tax credits.

The Senate will take up a supplemental spending bill that provides
about $45 billion in discretionary funds, largely for military
operations related to Afghanistan and Iraq. Among other things, these
funds will be used for the president’s expansion of 30,000 additional
American troops in Afghanistan as well as some reconstruction funds.

The bill partially funds the president’s request of $118 million
for the Gulf of Mexico oil spill and some relief monies for Haiti.

It also allocates $5 billion for FEMA to replenish its funds to
deal with natural disasters.

The bill also includes $13 billion in mandatory funds to compensate
Vietnam veterans exposed to Agent Orange.

During the Senate debate, Democratic senator Tom Harkin has said he
will press to add $23 billion in aid to states to avoid the layoffs of
hundreds of thousands of teachers.

Some Republican senators said they will try to remove those funds
not related to the wars in Afghanistan and Iraq.

With the Memorial Day recess approaching, it seems increasingly
unlikely that the House and Senate will even try to pass a broad budget
blueprint for fiscal year 2011.

Budget resolutions set five-year spending and revenue goals and are
supposed to be passed by April 15.

But congressional Democrats have indicated that they may opt to
pass a simpler deeming resolution that will allow work to go forward on
the 12 spending bills for FY’11.

The new fiscal year starts on Oct. 1.

** Market News International Washington Bureau: 202-371-2121 **

[TOPICS: M$U$$$,MFU$$$,MCU$$$]