WASHINGTON (AP) — The Senate's tax-writing panel is moving to revive dozens of tax breaks for businesses like biodiesel and wind energy producers, even as the GOP-controlled House trumpets symbolic legislation to erase them and create a new tax code with lower rates and fewer special interest tax breaks.
The $200 billion-plus package debated by the Senate Finance Committee Thursday is anchored by a two-year provision to protect middle- and upper-income taxpayers from being hit by the alternative minimum tax, shielding them from higher levies originally meant to prevent the rich from escaping taxes altogether.
The cost of the package grew by more than $50 billion since its release on Wednesday, including a production tax credit for wind production criticized by presumptive GOP nominee Mitt Romney. That provision was initially targeted for elimination. Supporters of a tax break for builders of NASCAR tracks and other motorsports facilities also managed to revive them after they had faced the chopping block.
Sen. Ron Wyden, D-Ore., a longtime sponsor of tax reform, won a committee vote to revive a tax break for plug-in motorcycles and golf carts.
Panel members claimed the exercise was actually a step forward for tax reform because they had summoned the courage to allow almost 20 tax breaks to expire. They included a much-criticized tax credit for ethanol producers.
Top panel Republican Orrin Hatch of Utah — a longtime proponent of a popular tax credit for businesses that invest in research and development — said Thursday's developments represented progress given that the number of tax breaks in the annual "extenders" debate had ballooned from 42 in 1998 to 154 last year.
"The tide is turning," Hatch said. "For the first time in my 21 years on this committee, we are deliberately moving in the opposite direction."
"It's the first step in a long journey," said Kent Conrad, D-N.D., though he acknowledged "there is a certain irony" to claiming the renewal of all the tax breaks is a step forward for tax reform.
The tax breaks package is advancing even as efforts to prevent the expiration of numerous Bush-era tax cuts have come to an election year impasse over whether to extend the full range of Bush tax cuts or allow expiration of those enjoyed by people earning more than $200,000 a year and couples making more than $250,000. President Barack Obama has demanded that these tax cuts be terminated.
The House voted to fully renew the Bush tax cuts on Wednesday. On Thursday, it took up legislation putting the House on record in support of tax reform that would lower the top income tax rate to 25 percent, financed by cleaning out the nation's loophole-cluttered tax code. The tax reform effort wouldn't begin until next year.
Democrats said the GOP tax reform plan would raise taxes on the middle class while awarding millionaires with disproportionately large tax cuts. To cut the rates so low would require eliminating popular tax breaks like the mortgage interest deduction, they say.
"The only way to finance these massive tax cuts for the highest earners is to eliminate or significantly curtail provisions that support the middle class," said Rep. Sander Levin, D-Mich.
Over in the Senate, Tom Coburn, R-Okla., lost an attempt to kill tax credits for manufacturers of energy efficient appliances. Manufacturers of dishwashers can claim a maximum $75 credit but makers of refrigerators can get credits of up to $200, while manufacturers of clothes washers can reap tax subsidies of op to $250. He also lost a bid to scale back the wind energy tax break.
