Tuesday, August 01, 2006

ETETRA 06 status

Tax Notes ($) is reporting that a cloture vote on ETETRA 06 will happen this week, most likely on August 4, the day the Senate plans to adjourn for August (the House is gone already). The vote will be close. If it passes, two more votes will be required, one to limit debate and one for final passage. If the first vote succeeds, adjournment will be delayed, and they may continue into the weekend. If it fails, they will move on to the uncontroversial pension legislation, also passed last week in the House.

If the Senate passes ETETRA 06 as is, it's enacted. If they amend it, a Conference will be needed in September to resolve differences. Thus, Majority Leader Frist is trying to prevent any amendments.

This seems like the irresistable force meeting the immovable object, though Frist has been very resistable to this point.

They cut the "cost" of estate tax reform by more than half by delaying the $5 million exemption until 2015. I understand that part. Here's the part I'd like someone to explain to me. According to Tax Notes, the whizzes who score the legislation for tax impacts have ruled that the increase in minimum wage "would have no federal revenue effect."

How can that be? At a minimum, wouldn't FICA receipts go up, even if the ordinary income tax collections are small? Or did they really decide that the economists are right, the higher minimum wage will cost the economy jobs, and this revenue loss offsets the gains from some taxpayers?


JLM said...

Yup, that's what some expert (I didn't tune in soon enough to hear who; you can look it up online) was saying this morning. That is, "most labor economists" believe some jobs are lost, presumably enough to leave total wages, and total FICA receipts, unchanged.

Jim Gust said...

But wait, I thought the revenue estimators were not allowed to take dynamic economic effects into account? That's why they can never forecast the effects of capital gains tax cuts correctly. Heck, they can't even get the direction of the effect right!

I suspect that if they pointed out that minimum wage increases are eaten up by higher taxes, the debate would be extended to include more tax benefits for low income people. By saying no revenue effect, they are closing off the debate.