At first glance, it might seem as if House Democrats were so overwhelmed by their ambitious legislative agenda that they confused their big climate change legislation with their big health care bill.
A package of last-minute changes to the Democrats’ health care bill made public on Tuesday night included a curious tax provision related to the production of biofuels, including ethanol. By changing some of the rules related to tax credits for biofuel manufacturers, the provision would raise about $24 billion in additional tax revenue from the biofuel companies over 10 years.
So what do biofuel producers have to do with health care? Actually, nothing. The change was all about the money.
In case anyone hasn’t noticed, there are few things that Congress hates more than raising taxes. As a result, two of the favorite euphemisms on Capitol Hill are “pay-for” and “revenue-raiser,” which are just fancy ways of describing a tax: something that “pays for” legislation, or “raises revenue” to pay for legislation.
But good revenue-raisers are hard to find. And when one is available, lawmakers often fight over it.
In the case at hand, Senate Democrats swiped a revenue-raiser that House Democrats had included in their health care legislation: a delay in a tax code change, which would result in multinational corporations’ paying $26.1 billion in taxes over 10 years that they would otherwise be spared. The Senate Democrats decided to use that tax revenue to help pay for legislation to extend unemployment benefits and a popular tax credit for first-time homebuyers.
But that move left a hole in the House Democrats health care bill and sent lawmakers in search of another way to raise revenue.
The solution was a change in the “second generation biofuel producer tax credit” which will make up most of the money taken by the Senate. In essence the change means some biofuel producers will receive less in tax credits than under current law. (The House also retained a limited version of the tax code change for multinational companies, which will generate $6 billion for the health care bill.)
Representative Chris Van Hollen, Democrat of Maryland, who sponsored the biofuel amendment on behalf of the House Democratic leadership, said that it was both a good way to raise money and an improvement in alternative energy policy that Democrats would have carried out anyway.
“The idea is to make sure that biofuels get a tax credit to the extent to which they meet the energy efficiency goals,” Mr. Van Hollen said. “Number one, this is something we have been focused on in terms of good policy.”
But he also quickly added that the Senate’s swipe of the tax provision — technically a provision “to delay implementation of worldwide interest allocation” — had left the House no choice but to find more money.
The biofuel provision, Mr. Van Hollen added, “is a good piece of policy that also accomplishes the goal of providing revenue.”
Such a tug-of-war over revenue-raisers is hardly unusual in Congress. But at a time when lawmakers and the White House are thinking about ways of reducing the nation’s huge long-term debt, the current spat highlights how increasingly difficult it has become for lawmakers to generate revenue without imposing new taxes that will be felt directly by the constituents who elect them. President Obama’s promise not to raise taxes on Americans earning less than $250,000 a year has made that challenge even harder.
Some Republicans have been warning that Democrats are using most of the available revenue-raising ideas to pay for the health care legislation, rather than reducing the deficit. In the Senate, Democrats on the Finance Committee decided to limit all of the tax provisions in the health care bill to the health arena. Otherwise, the worldwide interest allocation provision might well have been included in the Senate Democrats’ own health care bill.
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