Congress nears deal to avoid tax increases, Obama vows veto
WASHINGTON — Congressional leaders appeared near a deal late Tuesday to renew some $450 billion in tax deductions cherished by consumers, citizens and companies alike, including a long-standing sales tax deduction for Texans.
The White House called it a bad deal and vowed a veto, though it faces a tougher Congress in January when Republicans take over the Senate.
The deal was being hammered out by two leaders soon to leave their positions of power: Senate Majority Leader Harry Reid, D-Nev., who will become minority leader when the Republicans take over the Senate in January, and Rep. Dave Camp, the Michigan Republican who heads the tax-writing House Ways and Means Committee through the end of the year.
President Barack Obama signaled he’d reject the pending deal between lame-duck leaders because it would make permanent big items on the Republican wish list while only temporarily extending two measures that he wants to make permanent — the Child Tax Credit and the Earned Income Tax Credit, a tax break for working families that is set to expire in 2017.
“The president would veto the proposed deal because it would provide permanent tax breaks to help well-connected corporations while neglecting working families,” said White House Deputy Press Secretary Jennifer Friedman.
Other Democrats also attacked the deal being negotiated by their own Senate majority leader.
“We need to grow the middle class, not punish those working hard to get by while always giving preferences and priority treatment to big corporations who can hire high-priced, well-funded lobbyists,” said Rep. Chris Van Hollen of Maryland, the top Democrat on the House Budget Committee.
Millions of Americans face tax increases if Congress and the president cannot agree to extend a slew of expiring tax breaks. Some of the popular or visible tax deductions hanging in the balance are:
• A $4,000 deduction of higher-education expenses for middle-income Americans.
• A $250 deduction for elementary and secondary school teachers for school supplies.
• A tax deduction for companies, farms and restaurants that donate food to charities.
• The three-year tax depreciation for racehorses.
• A tax write-off for the first $15 million spent on film and television production.
• The seven-year depreciation for land improvements and support facilities at motorsports complexes.
One of the most closely watched items is the itemized deduction for state and local general sales taxes for taxpayers in seven states that don’t tax income. They are Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming. Tennessee and New Hampshire tax only dividend and interest income.
Taxpayers in states without income tax have been able to take a standard deduction based on size of family and income, or to itemize their deductions. It’s a potentially a large deduction when there’s the purchase of a vehicle, boat or large home appliances and furniture.
“I think a lot of people don’t really realize it . . . a lot of them don’t know they can take the deduction,” said Lewis Leatherman, a veteran accountant in Saginaw. “It’s not something that gets a lot of publicity.”
Several Republican members of Texas’ congressional delegation — including Sen. John Cornyn, Rep. Kay Granger of Fort Worth and Rep. Kevin Brady of The Woodlands — have helped lead the charge to make the sales tax deduction permanent.
Brady has argued repeatedly that it’s a matter of “tax fairness” for Texans and people in other affected states. “The state and local sales tax deduction has helped Texas taxpayers save nearly $10 billion in federal taxes since we restored the deduction in 2004. We shouldn’t let them lapse or delay them into 2015,” he said earlier this month.
Many Democrats back the measure, too, including Rep. Marc Veasey of Fort Worth, who said he’s hopeful a deal will be struck. “This is an important issue for the Metroplex and I will work diligently with my House colleagues to see it through,” Veasey said.
The Senate in April passed a two-year bill to renew, extend or create 62 tax deductions. The House of Representatives, working on its own bill, identified six or seven deductions that could be made permanent.
But talks shifted after November’s elections, a problem for corporations that make hiring and investment decisions based on the tax code they expect.
“Some of members have gone ahead and made investments … there are others that are holding off, waiting to see what happens,” said Dorothy Coleman, vice president of tax policy for the National Association of Manufacturers. “For the people who have invested, not extending these [deductions] is going to amount to a tax increase. And if you don’t extend it, the people who are holding off investments might not make them, which is not good for the economy, either.”
One clear area of discontent was tax credits for energy produced through wind power.
The Center for American Prosperity, founded by the conservative billionaires David and Charles Koch, took out ads this week targeting certain House Republicans and asking constituents to contact their lawmaker in opposition to the tax break for wind energy. The Reid-Camp deal would phase out subsidies enjoyed by wind energy producers over a period of four years.
NASCAR tax credits
Heritage Action, the political arm of the conservative Heritage Foundation, wants a broader set of tax breaks eliminated.
“Things like the wind, NASCAR tax credits, we don’t think have any business being there,” said Dan Holler, a Heritage Action spokesman. “The same extenders package we see time and time again, and we think it’s bad policy.”
One company with much potentially at stake with the so-called NASCAR tax credit is the International Speedway Corp. in Daytona Beach, Fla.
“We do understand Congress is making final decisions about tax extenders, and our hope is that they will act and preserve the tax treatment the motorsports industry has used for decades,” said Gentry Baumline-Robinson, International Speedway’s chief spokeswoman.
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