Lawmakers will return Nov. 15 for the first of two lame-duck sessions (one before, one after Thanksgiving), but the outcome of last week's midterm elections is expected to limit the number of issues Congress will tackle during those sessions. Instead, post-election House and Senate leadership decisions will take the initial focus of both parties.
With Republican having gained the majority in the House but not in the Senate next year, GOP leaders most likely will focus their attention in the November and December congressional sessions only on must-have legislation, then wait until they have more votes in the new 112th Congress before tackling other major issues.
Fiscal 2011 spending must be will be part of the coming sessions. Currently, most of the federal government is operating under a continuing resolution that must be either extended or replaced with a permanent appropriations bill. While there are predictions that Congress will approve an "omnibus" spending measure (one bill that encompasses all spending for FY11), it is more likely that GOP leaders will seek a continuing resolution that would fund the government until next February or March. That way, Republicans would be able to put their stamp on current year spending, rather than leaving that honor to Democrats.
Expiring 2001 and 2003 tax cuts will also be a topic of debate, with a post-election compromise likely. President Obama has called for the George W. Bush-era tax cuts to be extended for everyone earning less than $200,000 per year ($250,000 for married couples filing jointly). Republicans and a growing number of Democrats are promoting the idea of "temporarily" preserving the Bush cuts for everyone, regardless of his or her (or their) incomes.
If Congress fails to extend the 2001 and 2003 tax cuts, higher rates will kick in for most taxpayers beginning in January. The administration has said that allowing the cuts to expire would add about $2,000 per year to tax bill of a typical middle-class family.
Lawmakers will also try to extend exemptions to the alternative-minimum tax, or AMT , by the end of the year. If they do not, about 29 million people would have to pay this additional tax in their 2010 filings, compared with just 4 million people who paid it in 2009.
Lawmakers also could debate the estate tax, which is set to increase to a rate of 55 percent for some individuals next year, with only a $1 million exemption. However, lawmakers know they have until April 15 next year to finally settle on this issue, leading to speculation that estate tax issues will be carried over into 2011.
Congress also is likely to consider other tax extender legislation, including a proposal to renew expired provisions such as the research and development tax credit, the ability to deduct state sales taxes from federal income tax and tax incentives for the production of biodiesel fuel which expired last January. There likely also will be an effort to extend the ethanol tax credit incentive and the U.S. tariff on imported ethanol, both of which are scheduled to expire at the end of the year.
Manning Feraci, vice president of federal affairs at the National Biodiesel Board, said the expiration of the biodiesel tax credit already has cost thousands of jobs in the industry. "Hopefully, Congress will see the wisdom of avoiding this unnecessary scenario next year and will seamlessly extend the biodiesel tax incentive through 2011 before they adjourn," he said.
However, a two-year bill covering biodiesel production in 2010 and 2011 would more than double the cost and the need for offsets, and Congress is under intense scrutiny and pressure to cut spending. Finding a way to continue federal biofuel subsidies could prove difficult for ethanol and biodiesel supporters in Congress.
Congress will need to make a decision whether to add the renewable energy tax incentive extenders to the bill that would extend income tax cuts. If the extenders bill is not tied to the bigger tax package, some observers see the energy tax extenders debate bumped into the new Congress, with a completion date of at least May or June.
