Taxes and Fiscal Year 2006 Budget Reconciliation: A Brief Summary

Publication Date: December 2005

Publisher: Library of Congress. Congressional Research Service

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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 draws to a close, Congress has begun 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 as H.R. 4297 and S. 2020, respectively. The full Senate approved a slightly modified version of S. 2020 on November 18. 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 Senate 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 Senate plan. Aside from the extenders, the Senate bill 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; both tax benefits and reforms related to charitable contributions; and revenue-raising items in the area of tax shelters and elsewhere. In addition, on December 7, the House passed "stand alone" bills extending the increased AMT exemption (H.R. 4096) and providing disaster-related tax benefits (H.R. 4440). This report will be updated as legislative developments occur.