By Paul M. Krawzak, CQ Staff

House Ways and Means Chairman Dave Camp is working on a plan to avoid the “fiscal cliff” by extending for a full year or more the Bush-era tax cuts and other tax and budget measures set to expire in January.

Republicans have pushed the idea of extending current tax and some spending policies into 2013. But the latest effort envisions a full-year extension, creating more time for broader tax and spending changes GOP lawmakers want to enact.

Most Democrats oppose extending the portion of tax cuts for the affluent, although there is disagreement about whether to draw the line at those who earn $1 million or more or couples that make $250,000 or more.

House Speaker John A. Boehner, R-Ohio, said last month that the House would vote before the election to extend the 2001 and 2003 tax cuts enacted under President George W. Bush to give Congress time to enact a comprehensive tax overhaul next year. Republicans and many Democrats argue that simplifying the tax code would boost economic growth.

But lawmakers said GOP leaders also are weighing a full-year extension of other expiring or expired provisions, including a law that shields 30 million taxpayers from the reach of the Alternative Minimum Tax and a periodically renewed “fix” that prevents scheduled cuts in reimbursements to physicians who treat Medicare patients.

“That’s an approach we’re looking at,” Camp, R-Mich., said June 1. “We need to make sure we don’t further damage our economy, and I think tax hikes would do that next year. So I want to avoid that, but also begin to move forward on a tax code that is simpler, fairer, that is more pro-growth.”

Sequester Is Separate

The plan to extend current policies does not include delaying $109 billion in automatic, across-the-board spending cuts that are set to hit in January as a result of a special congressional committee’s inability to agree on a deficit reduction plan last year. The House passed a bill (HR 5652) last month that would turn off the portion of the sequester that would cut discretionary spending by $98 billion and replace it with hundreds of billions of dollars of cuts in mandatory programs. Senate Democratic leaders oppose that bill because it depends entirely on spending cuts, most of them in domestic social programs, and does not include a tax increase.

In a report last month, the Congressional Budget Office warned the economy could contract in the first half of next year, causing a recession, if all tax cuts are allowed to expire in January, coupled with the automatic spending cuts. Higher taxes and lower spending combined would deliver an economic hit estimated at hundreds of billions of dollars in 2013 and more than $7 trillion over a decade, CBO said. Camp said he would like to extend the “doc fix” for at least a year and perhaps longer. But he said he’s opposed to extending the temporary payroll tax cut when it expires in January.

Waiting on the Election

Most Democrats favor allowing upper-income tax cuts to expire. They also are pushing for what they call a balanced deficit reduction package that includes higher taxes.

“We can’t get increased revenue and extend the high-income tax cuts,” said Sander M. Levin of Michigan, the ranking Democrat on Ways and Means. Levin opposes extending tax cuts for families that earn more than $250,000 per year.

“It’s a point of leverage, but it’s a point of policy and a lot will be determined by the election,” he said. “If the president is re-elected there will be no extension of the high-income tax cuts.”