House passes $54B in tax breaks, energy incentives
WASHINGTON -- The House passed a $54 billion tax package Wednesday that Democratic backers said would help relieve dependence on imported oil while easing the economic strain on parents, homeowners and businesses.
The wide-ranging legislation passed 263-160, sending it to the Senate and an uncertain future. Most Republicans opposed the bill because it is paid for by requiring some corporations with offshore offices to pay more taxes and doesn't address shielding taxpayers from the alternative minimum tax.
The White House, citing those factors, threatened a presidential veto.
The measure renews dozens of targeted tax breaks that have expired or will expire soon and provides new tax relief by expanding for a year the refundable child tax credit available to lower income families. It allows, for one year, a new deduction of property taxes for non-itemizers, worth up to $700 for a couple.
"It would cut taxes for millions of middle-income families," said House Speaker Nancy Pelosi, D-Calif. She said 30 million homeowners would benefit from the property tax credit, the refundable tax credit would help the parents of 13 million children and renewal of a deduction for tuition and other education costs would benefit 4.5 million families. An additional 11 million would be affected by extending current deductions for state and local sales taxes, she said.
It also extends deductions for the out-of-pocket expenses of teachers and allows tax-free deductions from individual retirement accounts.
The measure provides some $17 billion in tax incentives for renewable energy sources such as wind and solar power, carbon capture and sequestration projects, plug-in cars and technology for green buildings. It provides $8.8 billion over 10 years to renew the research and development tax credit. It creates a new category of tax credit bonds to finance state and local government initiatives to reduce greenhouse gas emissions.
The bill, said Ways and Means Committee Chairman Charles Rangel, D-N.Y., would reverse the trend of the nation's "addiction to oil and the lack of will to do anything about it."
Republicans protested a new tax credit giving a more generous deduction to attorneys who pay litigation costs in advance in contingency-fee cases. That provision would cost an estimated $1.6 billion over 10 years.
But the main protests were over the $54 billion in so-called offsets, new sources of money to pay for the legislation. One would a loophole allowing hedge fund managers and others working for offshore corporations to defer tax on their compensation and another would delay implementation of a tax break for multinational corporations operating overseas.
"There is no need to raise taxes to prevent a tax increase," said Republican leader John Boehner of Ohio.
Republicans also scolded the Democrats for putting off the question of the alternative minimum tax, a levy created in 1969 to catch a small number of very rich tax dodgers. Because the tax was never adjusted for inflation, it hits more upper-middle and middle-class taxpayers every year unless Congress acts to prevent that.
Republicans said that, without a fix this year, the number of those affected would grow from about 4 million to 25 million, at an average added tax burden of some $2,400.
"This oversight, this neglect, I think, is the single largest flaw in the bill," said Rep. Jim McCrery of Louisiana, top Republican on the Ways and Means Committee.
Last year, Congress battled into December, delaying the processing of some IRS returns, over whether to pay for a $50 billion AMT fix. In the end there was no offset.
Rangel and other Democratic leaders stressed that they would deal with the AMT this year, although they face the same obstacles as last year. House Democrats, following their "pay-as-you-go" rules to keep the federal deficit from growing, insist on finding new sources of revenue but face White House opposition and a GOP-led filibuster in the Senate.