As a follow-up on my previous post regarding expiring tax provisions, Senator Grassley has recently called attention to the practical problems that Congressional inaction is creating for taxpayers. A story in the 9/14 BNA Daily Tax Report highlights Grassley’s efforts. In particular, Senator Grassley is calling attention to three expired provisions that have significant impacts on large numbers of taxpayers: (1) deductions for tuition and related expenses; (2) the substitute deduction for state and local sales taxes in lieu of income taxes; and (3) the “above the line” deduction for teacher supplies. All three expired at the end of 2005; I would guess all three have broad support.
Though Congress might come back after the elections and fix this problem, Sen. Grassley’s staff prepared a memo explaining that this won’t be good enough. (That memo is dated 9/13). As a practical matter, the IRS needs time to prepare and print the applicable tax forms. They say this needs to be finished by mid-October or the forms won’t be ready. That means that Congress needs to fish or cut bait if they are going to follow through on this; delay will adversely affect a lot of people.
According to the Senator, large numbers of taxpayers are affected: “According to IRS data, 8.6 million families and individuals claimed the state and local sales tax deduction in 2004. The second widely-applicable deduction is the college tuition and fees deduction. According to IRS data, 3.7 million families and individuals claimed this deduction in 2004. The third widely-applicable deduction is a deduction for teachers who provide their students with classroom supplies. According to IRS data, 2.66 million teachers claimed this deduction in 2004.” (This quote comes from a story in today’s BNA Daily Tax Report).
It should be noted that those items included in the “trifecta” bill were effectively stopped by the Democratic invocation of the pseudo-filibuster rule requiring 60 votes in the Senate. There was a majority in both houses to support that bill. The Republican majority seems unable to repeal this rule. Of course, if they should find themselves in the minority, they, too, may benefit from the blocking power. But then again, who’s to say that rule will stay in place if the powers that be are different. Query how this will affect voter’s perceptions in the fall: who will get the blame on this issue? Sounds like some more negative campaign ads will be headed our way.