Tax ARTICLE - Senate Approves Fiscal Year 2008 Budget

The Senate on March 23 approved a $2.9-trillion fiscal year (FY) 2008 budget proposal (SConRes 21) that would provide two years of additional relief from the alternative minimum tax (AMT) and would apply a projected $132-billion surplus in 2012 toward the permanent extension of some expiring tax credits. The measure was approved by a 52-to-47 vote margin.

The resolution provides a reserve fund allowing for new tax relief and the extension of expiring provisions, but only if the cost of those measures is offset. The revenue levels in the resolution assume that Congress will take steps to counter the effects of the expiration of tax cuts in 2010 by mandating that lawmakers find a way to pay for the extension without increasing the federal debt.

Senate Budget Committee Chairman Kent Conrad, D-N.D., said that additional revenue can be achieved without raising taxes by closing the tax gap, shutting down illegal tax shelters, addressing tax havens, and simplifying the tax code. The Senate's fiscal blueprint also fully funds President Bush's budget request for the IRS, including additional resources available through a discretionary cap adjustment that directs $399 million to IRS enforcement activities.

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An amendment offered by Senate Finance Committee Chairman Max Baucus, D-Mont., would allow families to receive permanent tax relief from the marriage penalty, along with permanent extension of the refundable child tax credit, the adoption tax credit, the higher child care tax credit, the 10-percent income tax bracket, and the current estate tax rate and exemption level. Military personnel would receive a permanent allowance of the earned income tax credit for combat pay.

In addition, the Baucus amendment would provide $15 billion for the Children's Health Insurance Program (CHIP) over the last three years of the budget window and would effect a $15- billion decrease in the reserve fund that requires raising additional money to cover CHIP costs.

Other tax-related amendments approved include creation of a deficit-neutral reserve fund for extending the classroom supplies tax break for teachers, creation of a 60-vote Senate point of order against tax rate increases, and creation of a point of order against budget resolutions that fail to balance in five years without utilizing Social Security funds.

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