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Tax Extenders Bill Is Big Deal for Nevada, Florida
Posted at 5 a.m. on April 30, 2014
Taxpayers from Nevada and Florida can expect to get walloped if Congress doesn’t renew a package of expired tax breaks headed for the Senate floor.
Both states benefit disproportionately from two major expired provisions — the deductibility of state sales taxes and a mortgage forgiveness provision.
Unless Congress acts, homeowners getting relief from their banks in two of the states hit hardest by the housing crash would see a huge tax increase. And because neither state has an income tax, its taxpayers would be especially hurt if the sales tax deduction isn’t renewed.
“That’s a double whammy for at least those two states,” said Will McBride, chief economist at the Tax Foundation, a nonpartisan research think tank. “A sudden end to those tax breaks, it could be a significant hit.”
National Association of Realtors Deputy Chief Lobbyist Jamie Gregory noted that the mortgage provision has been a priority for Senate Majority Leader Harry Reid, D-Nev.
Nevada and Florida “were hit hard with short sales and principal reductions and debt forgiveness, which is one reason why Majority Leader Reid has been a huge proponent,” he said.
Senate action on the extenders package — approved by the Senate Finance Committee before the recess — could come as soon as next week, Democratic aides said.
“I have positive feelings that we can pass it,” a senior Senate Democratic aide said.
This week will be consumed by debate on a Democratic proposal that would phase in an increase in the minimum wage to $10.10.
Reid is expected to set up a procedural vote on the proposal for Wednesday. If it fails, which is expected due to GOP opposition, Reid could move to confirm nominees. Then the Senate will likely take up an energy efficiency package sponsored by Sens. Jeanne Shaheen, D-N.H., and Rob Portman, R-Ohio.
Congress previously extended the package as part of the broader “fiscal cliff” deal enacted in 2013.
The conservative Club for Growth is calling on senators to oppose the measure.
“This bill is mainly a hodgepodge of special interest earmarks in the federal tax code,” the group said in a release earlier this month. “Thankfully, these extenders expired at the end of 2013, so the best thing the Senate can do now is nothing.
“Majority Leader Harry Reid should cancel consideration of this bill and instead call for broad, pro-growth tax reform that will lower rates and remove other burdensome carveouts in the tax code,” the statement continued.
Democrats, who control 55 votes in the chamber, would need five Republicans to reach the 60-vote threshold to overcome any procedural hurdles, as long as they all vote together.
Two possible Republican votes include Sens. Marco Rubio of Florida and Dean Heller of Nevada.
Rubio is examining the issue carefully, according to an aide.
Heller, who hasn’t said how he plans to vote, wrote a letter in March to Finance Chairman Ron Wyden, D-Ore., and ranking member Orrin G. Hatch, R-Utah, underscoring the importance of the provisions to Nevada.
“Currently, Nevada is in a fragile state of recovery, and in order to spur growth in our state, I request the continuation of the state and local sales tax deduction and Mortgage Forgiveness Debt Relief Act in any tax extenders legislation,” Heller said.
Heller noted many in Nevada owe more on their mortgages than their homes are worth.
“Failure to extend this law will cause many lower and middle class Americans to pay taxes when they refinance or sell their homes in ‘short sales,’” Heller wrote. “It makes little sense to tax people on income they never received, and an extension of this tax relief is needed to further help improve the housing market in Nevada.”
Heller is a co-sponsor of a bill with Sen. Debbie Stabenow, D-Mich., that would extend mortgage forgiveness tax relief for this year and next.
Regarding the sales tax deduction, Heller said reinstating the provision would protect middle-class Nevadans.
“This critical deduction saves Nevada taxpayers millions of dollars and is a vital component of our economy, spurring growth and creating jobs,” Heller said. “Failure to extend this critical deduction will force many lower and middle class Nevadans to bear a higher share of the federal tax burden.”
Also included in the package is a two-year extension of a provision that would allow for all racehorses to be written off over three years, rather than the usual seven years for depreciation.
Senate Minority Leader Mitch McConnell, R-Ky., whose state has a robust horse racing industry, has supported the idea in the past. But it’s unclear how he will vote. He is up for re-election in November and faces a tea party challenger in a May 20 GOP primary.
Chris Chocola, president of the Club for Growth, blasted the provision in a recent Wall Street Journal op-ed.
“Many tax extenders are government spending disguised as tax breaks, such as a three-year depreciation for racehorses,” Chocola said.