August 01, 2012
Senate Finance Panel Sets Aug. 2 Vote on Extending Tax Breaks
WASHINGTON--The U.S. Senate Finance Committee, working to meet a goal set by a determined chairman, wrapped up the details of a plan to extend expiring business tax cuts and set plans to hold a vote on the package of tax breaks before Congress departs for a five-week long recess.
The announcement of an Aug. 2 vote bucked expectations of Washington's tax-policy watchers, who late last week had predicted that Senate Finance Committee Chairman Max Baucus (D, Mont.) faced long odds of advancing legislation before the August recess. The release of a tax package provides a rare example of bipartisanship on tax policy and provides a signal to businesses that compromise between Democrats and Republicans is not totally absent in a Congress gridlocked over how to handle the "fiscal cliff" of spending cuts and expiring tax breaks due to take place next year.
"We're facing serious challenges with the fiscal cliff at the end of the year, and this win shows we're able to come together to tackle tough problems," Mr. Baucus said in a statement. "This is exactly the kind of work it will take to address the fiscal cliff."
Wind turbine makers, restaurants, and factories were among the groups that had been pushing for Congress to act. Among the most important contained in the package is a research and development tax credit that aims to encourage companies to risk money on innovations.
Still, the mix of tax breaks reflected a new reality on Capitol Hill: tax subsidies are no longer sacrosanct. A press release issued shortly after midnight was light on details of the plan, but Sen. Orrin Hatch (R, Utah), the top Republican on the panel, was clear in his message: business tax breaks must be trimmed.
"This legislation demonstrates that there is a will to subject long-standing tax policies to the full and much-needed public scrutiny of the American people," Mr. Hatch said in a statement. "This is a first step towards the ultimate goal of comprehensive tax reform that shows that there is a path to resolving the challenges we face as a nation."
The passage of any package is by no means assured. House Republican leaders are encountering resistance from the Tea Party-aligned wing of the party, who reject most tax subsidies and have lately indicated they will not throw their weight behind an extension of the tax cuts.
One item that one aide said was eliminated: a program that provides cash grants in lieu of a tax credit for as much as 30% of a project's cost. Known as the 1603 program after the section of the 2009 stimulus law that created it, the program has frustrated Republicans, who insisted that the program be wiped out.
Besides extending expiring tax breaks, the legislation also would patch for one year a perennial tax issue: the alternative minimum tax. Created to ensure that the wealthy could not escape taxes, the tax was never indexed for inflation and has begun trapping more Americans. Lawmakers regularly extend the measure.
The lawmakers did not identify a way to make up for the lost tax revenue. The Senate Finance Committee had reportedly decided against using any so-called offsets.
The panel's Senators had been meeting for weeks to come up with a deal. Talks intensified this week, and optimism began building on Tuesday. By the evening, tax aides were huddling in offices around the Capitol complex to hash out the details.
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