WASHINGTON With Republicans rushing late Friday to meet their Memorial Day target for getting President Bushs signature on legislation to cut taxes by $1.35 trillion over 11 years, the financial services industrys top tax priority expansion of retirement funds was on the chopping block.
Worse for the industry, the imminent switch in Senate control from Republicans to Democrats will probably make it harder for the GOP to push the additional corporate-focused tax cuts it has promised.
Democratic control significantly lowers the chance of there being a second and third bite at the tax-cut apple, as the Republicans had planned, said Edward L. Yingling, chief lobbyist for the American Bankers Association.
But he and other industry representatives would not rule out all future tax-relief items, such as broader eligibility of community banks and other small businesses for S corporation status. Such companies pay no corporate taxes, passing profits directly to shareholders, whose dividends are individually taxed.
With Democrats in control, they will want to move a minimum-wage bill, which would be a natural fit for small-business tax cuts, said Paul Merski, chief economist and director of federal tax policy for the Independent Community Bankers of America.
Ironically, the Democratic takeover of the Senate could rescue the expansion of retirement savings funds such as Individual Retirement Accounts and corporate 401(k)s.
The savings provisions, which do not have the blessing of the White House, were in terrible peril late last week of being scaled back or negotiated out of the $1.35 trillion tax package by House Republicans who were seeking to slice more off of the top individual income tax rate, congressional and industry sources said.
If those provisions do not survive, I dont think it would be disastrous, Mr. Merski said. Because of the popularity of it with Democrats, we might get something better in a future bill.