Tax break package stalls over disaster aid

September 19, 2008 3:50:02 AM PDT
A mammoth tax package aimed at giving a jolt to the staggering economy and protecting millions from new taxes headed for a vote after a dispute over aid to Hurricane Ike victims was resolved. HURRICANE IKE: Breaking news on Ike | POD locations | Person locator | Local gas station report | Hurricane guide | Viewer photos of Ike | Latest power numbers

"I believe that we've achieved our goal of getting fair treatment for our state and the victims of Hurricane Ike," Sen. John Cornyn, R-Texas, said Thursday. Earlier in the day, Cornyn had delayed movement on the bill because of dissatisfaction over the level of disaster aid for Texas.

Removal of Cornyn's objections set the stage for a final vote on the tax bill next Tuesday.

Sen. Kay Bailey Hutchison, R-Texas, said the compromise included allocating extra money to five hard-hit counties -- three in Texas and two in Louisiana -- and that the Texas governor would have discretion in dispersing other funds.

The bill would provide some $17 billion in tax incentives for renewable and clean energy, giving a critical boost to solar and wind energy entrepreneurs. It would extend more than $60 billion in targeted tax breaks -- for college tuition, R&D investment and dozens of others -- that have expired or will expire at the end of the year.

It also would fix for this year the alternative minimum tax so that the levy, supposed to affect only the rich, won't hit an additional 20 million taxpayers. That would cost almost $62 billion spread out over the next decade.

The tax bill is one of the last major chores Congress must complete before its scheduled adjournment at the end of next week.

The original proposal was for Midwestern states hit by devastating floods and tornadoes this summer to get about $4.8 billion in tax credits and other tax relief. Iowa, which suffered major damage, is represented by Sen. Charles Grassley, the Finance Committee's top Republican who produced the legislation with panel Chairman Max Baucus, D-Mont.

The bill also carves out almost $3.5 billion in tax breaks for other areas hit by natural disasters, but Cornyn contended that was insufficient, saying 2 million people in his state are still without power as a result of the crippling storm.

Senate Majority Leader Harry Reid, D-Nev., said Hurricane Ike relief could be attached to other bills the Senate will consider in coming days and urged quick action. "If we don't get this done it is going to add to the financial catastrophe we have facing this country."

If Texas gets more money in the tax package, Louisiana will demand a bigger share, Reid said. "Everyone wants more. When's enough enough?"

The Senate has made many stabs at passing the tax package this year, but has been unable to resolve the issue of whether the tax breaks should be paid for. Most Democrats say there should be new revenue sources to offset the costs to the federal budget while Republicans have objected to anything they consider a tax increase.

Senate Democratic and Republican leaders reached a compromise earlier this week under which the energy tax incentives would be paid for, mostly by tightening rules on taxes paid by oil and gas companies. The AMT fix would not be paid for while new tax revenues would offset nearly half of the other measures extending expired tax breaks.

The bill would still have to go back to the House, where Democrats have been more insistent that the package should not add to the federal deficit.

Keep your family safe this hurricane season. Check our complete tropical weather preparation guide


Load Comments