As the August 2 debt limit deadline approaches, it looks increasingly unlikely that tax reform in general (and estate tax in particular) will be significantly affected. Of course, the situation remains very fluid. Developments are expected during the week of July 18 in the House, in the Senate and in the ongoing negotiations.
House – Republicans leaders plan to hold a vote on their “cut, cap and balance” plan. Accompanying a debt limit extension, the GOP plan would “cut” spending by $2.4 trillion over ten years, statutorily “cap” spending in 2018 and beyond at 19.9% of GDP and attempt to “balance” the budget in the long-term through an amendment to the constitution. The constitutional amendment is expected to require a balanced budget within ten years, a two-thirds majority to raise taxes and a lower cap on spending at 18% of GDP. The combination of measures is expected to garner majority support in the House and may receive a vote in the Senate, but it is not expected to pass in the Senate.
Senate – Senate Majority Leader Harry Reid (D-NV) and Minority Leader Mitch McConnell (R-KY) continue conversations on a back-up plan in the event broader negotiations fail. Discussions appear to focus on a proposal which would largely empower the President to increase the debt limit without congressional approval, create a new bicameral, bipartisan congressional committee to reduce the deficit and reduce spending by up to $1.5 trillion over 10 years.
Negotiations – Meanwhile, Treasury Secretary Timothy Geithner was increasingly optimistic a deal could be achieved. “Despite what you hear, people are moving closer together. You have seen the leadership of the Republican Party … take default off the table. That’s encouraging.” However, many observers remain skeptical. The President has set a deadline of July 22 for leaders to reach an agreement.