In the dwindling days before the July 4 congressional recess, the House and Senate will try to break the longstanding logjams on three critical pieces of tax legislation: a proposal to approve a "patch" to hold constant the number of taxpayers liable to the Alternative Minimum Tax (AMT), a bill to renew dozens of tax provisions collectively referred to as the "extenders," and the tax title of Rep. Barney Frank's (D-MA) Federal Housing Administration (FHA) foreclosure guarantee bill. It is likely that Congress will enact some version of these bills before the legislative year is over. Without passage of the "patch," upward of 25 million Americans will find themselves paying an average of $2,000 in additional income tax under the AMT, according to White House estimates. In addition, hundreds of America's largest corporations have urged congressional leaders to pass the "extenders" package — even if it means offsetting the cost of the bill to get it through the House.

The disputes over these bills in recent weeks reprise arguments that the parties involved have been invoking for months, if not years. Foremost among the points of contention is the perennial issue of fiscal responsibility. The House and Senate PAYGO rules require that any tax cut or mandatory spending increase that adds to the deficit over five- and ten-year windows needs to be offset by the amount added to the deficit. The rule comes into play regarding the AMT patch and the extenders package. Currently, the FHA bill is revenue neutral.

The price tag of the patch is $61.6 billion. In his AMT patch bill, House Ways and Means Chair Charles Rangel (D-NY) proposes to pay for the patch with four main offsets: taxation of carried interest as ordinary income (which would raise an estimated $30.98 billion over 10 years), denial of Section 199 benefits for certain major integrated oil companies ($13.57 billion over 10 years), tighter tax enforcement of merchant credit card payments ($9.80 billion), and a limitation on the use of foreign tax havens ($6.94 billion). All but the credit card provision have passed the House in separate legislation that then died in the Senate, which has been the graveyard of prior House efforts at fiscal responsibility. Rangel has been adamant so far about paying for the patch in 2008, but previous years' precedent of waiving PAYGO for the patch may still happen in the end.

Interestingly, the odds of a partial or fully PAYGO-compliant extenders package are better. Again, Rangel and the House leadership insist on paying for the $55.5 billion package. However, the Senate has sent mixed signals. Senate Finance Committee Chair Max Baucus (D-MT) has proposed a fully-paid-for package, but votes to cut off debate on the package failed on June 10 and June 17, with at least 40 Republican senators opposed. Meanwhile, a consortium of 379 large American corporations sent a letter to the Senate leadership on June 16, making clear that the extenders package was such a high priority that they would rather have it paid for if that would enable its passage in the House.

At the heart of the FHA bill is a $300 million loan guarantee program that CBO estimates would prevent half a million foreclosures. The sticking points in the FHA bill debate have changed often, as the administration issues new veto threats against different aspects of the bill after their old demands have been met by legislators. For example, when the administration demanded that FHA modernization and GSE (government-sponsored enterprises) reform be included in the bill, Rep. Frank added such provisions. After that, in a veto threat sent to Congress on June 19, the administration took issue with the bill's provision to pay for the loan guarantee program by tapping into a new affordable housing trust fund, saying that it now opposes the creation of such a fund. On June 24, the Senate invoked cloture to move forward on the bill.

Innumerable other issues relating to these three bills have yet to be resolved, but in an election year, it is more likely than not that those issues, as well as the ones described above, will be resolved before Congress adjourns.