Baucus says passing tax extenders is a high priority

The legislation resuscitates tax measures like the research-and-development tax credit and education tax breaks that expired last year. It would also continue the Alternative Minimum Tax “patch” that shields middle-income taxpayers from paying the tax.

Extending these measures could cost over $100 billion, but pay-as-you-go budgetary rules give lawmakers some wiggle room by not requiring them to offset the cost of the patch for two years.

Baucus said there has been little discussion on how to pay for the bill.

“There’s little talk about how all of this needs to be paid for,” he said. “There’s been very little talk about that.”

Sources monitoring the issue closely tell The Hill that spending cuts could be a part of the final package, like using unallocated stimulus funds or grabbing TARP repayments. But there appears to be pushback on this idea.

The most recent iteration of the extenders paid for its cost by increasing taxes on carried interest, the oil spill liability trust fund and S corporations. If provisions remain a part of the package, Republicans might have a hard time supporting the overall measure.

Sources say there is growing concern among Republicans that supporting any tax increase might provoke opposition from the Tea Party and hurt their reelection bids.

The Tea Party has supported upstarts who have unseated Sens. Lisa Murkowski (R-Alaska) and Bob Bennett (R-Utah), and blocked Rep. Mike Castle (R-Del.) from running for the Senate. And some Republican senators who aren’t even up for reelection this year are tacking further to the right in their positions to keep the Tea Party from supporting a candidate in their home state.

This means Republicans who might have tolerated tax increases in the last extender package might oppose them in the new bill, giving Democrats a tough challenge in locating the right pay-fors to offset the cost of the legislation.

Senate Democrats need at least one Republican to support extenders to advance it from the chamber.