The already slow pace of tax legislation moving through Congress was further delayed by Washington basically shutting down due to a sizeable weekend snow storm.  President Obama proposed bipartisan talks on healthcare, but the positions of Republicans and Democrats appeared to remain very far apart.  The Senate is still working on its jobs bill, with no significant progress reported.  Votes in the Senate to test whether the Republicans will use their new filibuster power to block votes were also delayed.

With the swearing in of the new Republican Senator from Massachusetts, Scott Brown, on February 4th, the Democrats filibuster proof majority comes to an end.  The jobs legislation that the Senate is currently trying to craft and pass by next week will therefore require at least some bipartisan support if it is going to make it through the process.  Both Senate Democrats and Republicans support some aspects of the jobs legislation, particularly the tax breaks for small business.  Republicans are less inclined to support other spending provisions and related provisions to pay for the tax breaks.

The Administration released its Fiscal Year 2011 Budget proposals (the "Green Book").  On the whole, it is strikely similar to the 2010 budget proposals, another indication of what was not accomplished in President Obama's first year in office.  Some changes this time around include a one-year extension of the Making Work Pay Credit rather than it permanent enactment, dropping the proposal to repeal check-the-box for international pass-through entities, limiting the deferral of expenses to interest expense, a new proposal to tax excess returns from moving intangible assets to low tax jurisdictions, and a new proposal to disallow the deduction of excess nontaxed reinsurance premiums paid to overseas affiliates.  The Administration's proposals with respect to how to deal with the expiration of the Bush tax cuts remain similar to those proposed last year.  Job creation proposals have a cost set aside in the budget but are otherwise not set forth in the same detail as proposals currently coming from the President and members of Congress.

Senate Majority Leader Harry Reid has said the he will release his proposals for a jobs bill during the week of Feb. 1^st. At a cost of around $82-billion, it would include as its centerpiece a 2010 Social Security payroll tax break for employers who hire workers that have been unemployed for at least 60 days. That jobs creation tax credit would weigh in at an estimated $20 billion. The cost would be offset by a combination of leftover TARP money and a new corporate tax backed by SFC Chairman Baucus that would raise $7.5 billion from pension funding relief provisions.

The Senate passed a resolution approving pay-as-you-go-budgeting by a vote of 60 to 40.  The resolution would generally require that tax cuts and increases in government spending be offset by revenue raisers or other reductions in government spending.  The resolution includes a number of exceptions, such as a permanent extension of the 2001 and 2003 tax cuts and temporary extensions of the estate tax, AMT fixes, and certain Medicare provisions.  The House passed a similar but somewhat different resolution in July, 2009.  PAYGO has become a political issue as Democrats contend that the lack of PAYGO during the Bush years permitted tax cuts, prosecution of wars, and the Medicare drug program to baloon the deficit, while Republicans contend that PAYGO without spending caps will become an excuse for tax increases. 

Tempered by a national impatience marked by the vote in the recent Senate race in Massachusetts, President Obama delivered a State of the Union Address that emphasized jobs. That central theme also embraced a focus on small business and middle class tax relief. The president called for a small business tax credit to “hire new workers or raise wages, “the elimination of all capital gains taxes on small business investment (1202 stock); and a new round of bonus depreciation and 179 expensing “for all businesses, large and small.” In reaching those goals, he challenged the Senate to pass the current jobs bill (Jobs for Main Street Bill of 2010 (HR 2847), already approved by the House last December. He also called for tax incentives for clean energy jobs. For the middle class, Obama's State of the Union proposed a $10,000 tax credit to families to cover four years of college, as well as a general pledge to create more U.S. jobs by “taking away tax breaks for companies that ship our jobs overseas.” Finally, the president's State of the Union address renewed his pledge not to extend Bush-era tax cuts for “oil companies, investment managers or those making more than $250,000 a year.”

Getting in step with unifying the tax agenda of the administration and Congressional Democrats, House Ways and Means Committee Chairman Charlie Rangel announced today, prior to the State of the Union address, a February 3 hearing on the President’s budget proposals for fiscal year 2011. The hearing anticipates Obama’s February 1 release on an overview of his fiscal year 2011 budget to Congress, which will detail tax and spending proposals.

Earlier this week, the administration released a preview of recommendations that reportedly would be made by President Obama's Middle Class Task Force in February. They include an expanded and refundable saver's credit, automatic IRAs in the workplace, and an enhanced child and dependent care tax credit.