Tax cut bill raises fears in Congress

An expansive tax extenders bill that the House is set to unveil this week may end up being scaled back as vulnerable members balk at its ballooning cost, sources told The Hill.

The House is expected to take up the bill this week, House Majority Leader Steny Hoyer (D-Md.) told reporters Tuesday morning. But negotiations on its size are ongoing, lawmakers and lobbyists said.

{mosads}House Ways and Means Committee Chairman Sandy Levin (D-Mich.) and Senate Finance Committee Chairman Max Baucus (D-Mont.) put the basic bill together. As more of their colleagues have weighed in, the legislation has grown in size; the latest version is believed to cost $220 billion.

Only a quarter or so of the total is paid for; the remainder would be deemed emergency spending and therefore fall out of the House’s “pay-go” restriction, which requires that legislation not add to the deficit.

On Tuesday, Baucus said a deal was close at hand.

“There’s rough agreement. The hope is that the House will pass a bill and we’ll pass the same bill over here, with 60 votes.”

But the budgetary maneuvering is not sitting well with some vulnerable House members and centrist senators who fear a backlash from deficit-wary voters. Those members may be swayed by the outcome of

Tuesday’s special election for the late Rep. John Murtha’s (D) seat in Pennsylvania and the Arkansas primary, lobbyists say.

One Republican lobbyist said there’s talk of expanding a controversial carried-interest tax provision to pay for more of the bill. The tax falls on profits made by managers of hedge and private equity funds. If that falls through, Congress may pass a short-term fix to Medicare physician rates and punt a longer-term fix until after the August recess to save money.

If the bill turns into a Christmas tree, “there’s a bigger chance that it’s all just going to blow up,” a Wall Street healthcare analyst said.

Lawmakers are under intense pressure to get something to the president before the Memorial Day recess begins next Friday. Already, at least 24 states that have drawn up their budgets for the coming year are counting on extra federal Medicaid dollars that were in the House- and Senate-passed versions of the tax extenders bills. Both versions would extend these enhanced federal Medicaid payments for six months.

Lead supporters of the expansion — Reps. Chellie Pingree (D-Maine), Tammy Baldwin (D-Wis.) and Gene Green (D-Texas) — have been circulating a letter to the Democratic and Republican leadership requesting quick action.

The letter quotes a study suggesting that without the extension of state fiscal relief, state spending cuts could result in 900,000 jobs lost nationwide in the public and private sectors.

In addition, the letter says, “without federal support for Medicaid programs, states will not have the resources they need to successfully implement health reform.” The Medicaid measure would cost $25.5 billion.

The letter was sent to House Speaker Nancy Pelosi (D-Calif.) and Minority Leader John Boehner (R-Ohio) last week with 219 co-signers, including Republican Reps. Pete King of New York, Joseph Cao of Louisiana and Parker Griffith of Alabama.

Lawmakers are also under intense pressure to prevent a 21.3 percent cut to physicians’ payment rates under Medicare, set to kick in June 1. House members under pay-go rules could pass a five-year, $88.5 billion “doc fix” without paying for it, but it’s not clear if Blue Dogs have the stomach for increasing the deficit — or if the measure would survive in the Senate.

Sen. Ron Wyden (D-Ore.), a member of the Senate Finance Committee, said he voted against a permanent doc fix last year because it wasn’t paid for — and he has the same concerns now.

{mosads}“I swallowed hard and voted against that measure in the course of the health bill because [it] wasn’t paid for. So I’m going to try to be just as tough-minded here in the next couple of weeks about saying that additional spending has got to be paid for.”

Still, Hoyer reiterated on Tuesday the House’s commitment to preventing the cuts.

“We’re very focused on making sure the sustainable growth rate is a rate that will continue to have doctors participating,” Hoyer said. “It’s very, very important for us to deal with that, and we intend to deal with it.”