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Taxes and Fiscal Year 2006 Budget Reconciliation: A Brief Summary , Record No.: RS22322, Date: November 16, 2005 1 (November 16, 2005)

handle is hein.tera/crstax0506 and id is 1 raw text is: Order Code RS22322 Updated November 16, 2005 CRS Report for Congress Received through the CRS Web Taxes and Fiscal Year 2006 Budget Reconciliation: A Brief Summary David L. Brumbaugh Specialist in Public Finance Government and Finance Division Summary On April 28, 2005, Congress approved an FY2006 budget resolution (H.Con.Res. 95) with reconciliation instructions calling for three bills: a bill containing spending cuts ($1.5 billion in FY2006 and $34.7 billion over five years); a bill increasing the public debt limit by $781 billion (to $8,965 billion); and a bill containing tax cuts. The reconciliation instructions for taxes called for tax cuts of$11 billion in FY2006 and $70 billion over five years. As 2005 enters its closing months, Congress is beginning consideration of the tax-reduction reconciliation bill. On November 15, both the House Ways and Means Committee and the Senate Finance Committee approved separate tax- cut proposals. An important part of both bills is the extension of numerous temporary tax-reducing provisions that are scheduled to expire at various times over the next several years. While most of these extenders are the same in each package, there are some differences, including extension of the increased alternative minimum tax (AMT) exemption, which is contained in the Finance proposal, but not the Ways and Means bill; and reduced rates for capital gains and dividends, which are in the Ways and Means measure, but not the Finance Committee plan. Aside from the extenders, the Finance Committee proposal contains a number of additional items not contained in the Ways and Means Committee plan, including tax incentives for development in areas affected by recent hurricanes; tax measures related to charitable contributions; and revenue- raising items in the area of tax shelters and elsewhere. This report will be updated as legislative developments occur. The figures in the budget resolution do not place an absolute limit on the tax cuts Congress can pass for FY2006 or subsequent years - for example, the budget resolution itself called for a total of $106 billion in tax cuts over five years - the same amount proposed by President Bush in his FY2006 budget proposal. However, the congressional budget resolution contains only $70 billion in its reconciliation instructions ($11 billion for FY2006). Tax cuts specified in the reconciliation instructions are protected from certain points of order under Senate budget consideration rules; if a point of order is raised, a supermajority is required for passage. Thus, as a practical matter, the $70 billion five-year and $11 billion FY2006 reconciliation figures may place a constraint on Congressional Research Service • -The Library of Congress

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