House moves to extend tax breaks to end of year

close

Video

Congress set to renew $45 billion tax break package

Mike Emanuel reports from Capitol Hill

Millions of businesses and individuals could be in luck as the House moves to extend a $45 billion package of expired tax breaks through the end of the year.

Businesses and individuals would be able to claim them on their tax returns this year, but there is no certainty they would have the same luck beyond Dec. 31.

Time is short because the House plans to adjourn for the year next week, and the Senate could as well.

"Let's see what they send us," said Senate Majority Leader Harry Reid, D-Nev., "and we'll make a decision then."

The $45 billion would be added to the budget deficit.

The tax breaks would benefit big corporations and small businesses. Commuters, teachers and people who live in a state without state income tax would benefit from the breaks as well. One in six taxpayers would be affected by the extension.

Congress routinely extends the package of tax breaks every year or two. But they were allowed to expire in January.

Technically, the bill is a one-year, retroactive extension of the tax breaks, even though it only lasts through the end of the month.

Advocates and lawmakers from both political parties said the short-term measure is the product of a divided Congress that has trouble passing routine legislation.

"It's just unworthy of the world's greatest economy to have a tax code for two weeks," said former Michigan Gov. John Engler, who is now president of the Business Roundtable, an association of corporate CEOs.

Talks between House Republicans and Senate Democrats to make the tax breaks permanent fell through last week after the White House threatened to veto the emerging package saying it too heavily favored big business.

Among the biggest breaks for businesses are a tax credit for research and development, an exemption that allows financial companies such as banks and investment firms to shield foreign profits from being taxed by the U.S. and several provisions that allow businesses to write off capital investments more quickly.

There is also a generous tax credit for using wind farms and other renewable energy sources to produce electricity.

The biggest tax break for individuals allows people who live in states without an income tax to deduct state and local sales taxes on their federal returns. Another protects struggling homeowners who get their mortgages reduced from paying income taxes on the amount of debt that was forgiven.

NASCAR racetrack owners, film and theater producers, electric motorcycle manufacturers, commuters who use mass transit and teachers who pay out of pocket for classroom supplies will also benefit from the tax breaks.

The package leaves out a tax credit that helps some laid-off workers pay for health insurance and a tax credit for buying an electric motorcycle, which makes some Democrats unhappy.

"The House proposal on a number of important particulars really clobbers working-class families," said Sen. Ron Wyden D-Ore., chairman of the Senate Finance Committee. "For example, the health care tax credit is particularly important to people who may have been laid off.

The credit for electric motorcycles was left out because of "an oversight," said Rep. Dave Camp, R-Mich., chairman of the tax-writing House Ways and Means Committee.