Congress on verge of major deal freezing ObamaCare taxes

Congress is closing in on a major tax deal expected to be unveiled Tuesday that would postpone two key ObamaCare taxes for two years.

{mosads}The deal, which will cost more than $500 billion over 10 years, would postpone the “Cadillac tax” on expensive health plans and the medical device tax, according to a summary circulated Tuesday morning by negotiators.

Freezing the Cadillac tax is a top priority of labor unions, that for years have pressed Democrats to get rid of this levy. The tax imposes a 40 percent fee on health benefits above a certain threshold.

The White House has opposed repealing the tax, but officials have signaled that President Obama would not veto the package over a two-year delay.

The package includes other tax breaks backed by the president, including a permanent expansion of the Earned Income Tax Credit, which was included in the 2009 stimulus bill.

The legislation would also make permanent the research and development tax credit and permanently increase Section 179, small-business expensing limits.

“We’ve been assured that three key tax provisions — one to make the R&D tax credit permanent, another that would allow startups to access the R&D tax credit, and another to allow the R&D credit to be claimed against the [Alternative Minimum Tax] — will be included in the extenders package,” said a Senate aide.

Lawmakers have been haggling over the tax package and a separate $1.1 trillion funding bill that would keep the government operating until September 2016.

Speaker Paul Ryan (R-Wis.) is expected to address the House Republican Conference at a meeting on both bills Tuesday evening. Votes in the House could come as early as Wednesday.

A sticking point in the talks is Democratic demands that several tax credits for renewable energy be included in the deal in exchange for lifting the U.S. ban on exporting oil.

Senate Democratic Leader Harry Reid (Nev.) in comments Tuesday morning on the Senate floor said the deal would be public if there was an agreement on the issue.

“We’ve made multiple offers to the Republicans that were certainly doable, reasonable, and all the Republicans had to do was say yes,” the Democratic leader said on Tuesday morning. “Saying yes to any of these offers … over the past few days, especially the last three days, the ink would be dry. The entire package would be filed.”

Reid suggested that lawmakers can face two decisions: Either reach a deal and include it as part of the omnibus and tax package, or move forward with the tax and omnibus legislation without the export ban included.

Freezing the Cadillac tax would kick a decision to the next president on whether the controversial tax will be repealed.

Jason Furman, President Obama’s chief economist, defended it Tuesday morning as an important piece of the law’s architecture. “It’s really important to us that we don’t see that measure repealed and we will work hard to prevent that from happening,” Furman, chairman of the Council of Economic Advisers, said at a Politico Morning Money event.

White House officials argue it’s an important curb on excessive healthcare spending.

Inclusion of it in the extenders package is a victory for Reid and Sen. Dean Heller (R-Nev.), who introduced a bill in September to repeal the tax. Reid assured labor leaders he would press hard to include the freeze in a package to extend a variety of expiring tax provisions.

The deal also would make permanent state and local sales tax deductibility, another top priority for Reid. He tried to get it done in a major tax package that the White House torpedoed last year because it did not include long-term expansions of the Child Tax Credit and the Earned Income Tax Credit.

The package will make permanent the expansions of the Earned Income Tax Credit and the American Opportunity Tax Credit for college tuition, key pieces of Obama’s 2009 stimulus, the American Recovery and Reinvestment Act.

It would also make permanent the deduction for teachers’ out-of-pocket classroom expenses and the minimum 9 percent low-income housing tax credit rate floor.

It also includes a five-year extension of a tax provision known as the Controlled Foreign Corporations Look-Through Rule that allows multinational companies to designate income as coming from low-tax countries.

Sarah Ferris and Jordain Carney contributed.