Senate OKs $100 billion in tax breaks
Published 10:51 pm Tuesday, September 23, 2008
WASHINGTON — The Senate passed a giant tax package Tuesday that saves more than 20 million taxpayers from the bite of the alternative minimum tax.
At a cost of more than $100 billion, the bill also nudges the nation toward greater use of alternative energy resources, renews popular tax breaks for businesses and individuals, and extends relief to disaster victims.
It includes a provision to ensure that mental health problems get the same level of insurance benefits as other medical treatment. The bill passed 93-2.
“The economy is struggling,” Senate Finance Committee Chairman Max Baucus, D-Mont., said. “At times like these, Americans need tax cuts that they’ve come to count on, that can help them get by.”
The tax bill is one of several major efforts to right the teetering economy in what could be the final week of this session of Congress. Lawmakers are trying to reach agreement on a $700 billion plan to bail out failing financial institutions, and Democrats are trying to put together a stimulus package to help average citizens get through the current economic crisis.
The House was expected to take up the tax package today.
The alternative minimum tax was enacted in 1969 to catch a few very rich tax dodgers. But it was never adjusted for inflation and now Congress must act every year to ensure it doesn’t catch more people.
Without action, those affected could grow from about 4 million to 25 million, at an average tax increase of $2,000. The fix would cost $64 billion spread out over 10 years.
The first segment of the three-part tax bill was a $17 billion measure to spur investment and create jobs in the renewable energy industry. The energy legislation extends through 2016 investment tax credits for the solar power industry and for homeowners who install solar and wind equipment.
Taxpayers can claim a credit of up to $7,500 for purchasing plug-in electric cars, and production credits are extended to wind, biomass and marine — waves and tide — facilities. There are incentives to use smart meters for more efficient home energy use.
Sen. Maria Cantwell, D-Wash., who helped put the energy package together, said the solar industry investment would provide power for more than 7 million people.
While enjoying wide bipartisan support, the tax bill has struggled to get through the Senate this year. Senate Democrats have been caught between Republicans and the White House who oppose any new taxes to offset the costs of the tax relief and House Democrats demanding that the bill be paid for to avoid adding to the federal deficit.
“Don’t send us back something else,” Senate Majority Leader Harry Reid, D-Nev., said in an appeal to the House. If there are changes, he said, “it will die.” The House bill could require that all renewals of expired tax breaks, except for the AMT, be paid for.
The Senate bill offsets the energy measures by limiting tax breaks for the oil and gas industry and pays for about $25 billion of the $68 billion in individual and business tax breaks.
Also renewed are deductions for state and local general sales taxes, higher education costs and teachers’ personal expenses.
Senate tax relief
Key components and costs of the Senate tax relief package. Cost estimates are spread over 10 years:
ENERGY INCENTIVES
Expands tax credits for wind, refined coal, biomass and marine renewables: $5.8 billion
Tax credit for solar energy: $1.9 billion
Credit for residential solar property: $1.3 billion
New credit for plug-in electric vehicles: $758 million
Extends credit for energy-efficient improvements to existing homes: $837 million
INDIVIDUALS, BUSINESSES
Extends until end of 2009 the deduction for state and local sales taxes: $3.3 billion
OTHER
Requires insurance parity with mental health and medical-surgical benefits: $3.9 billion
