Jan. 27 (Bloomberg) -- The U.S. Senate’s tax-writing committee added $70 billion in relief from the alternative- minimum tax to an $825 billion economic stimulus proposal.

The provision benefiting more than 30 million households, primarily with incomes between $100,000 and $500,000 annually, was approved by voice vote today as an amendment to $272 billion in tax cuts the Senate Finance Committee already had planned for the broader stimulus plan.

Inclusion of the alternative-minimum tax relief would swell the stimulus plan’s tax cuts to $342 billion. The tax relief is anchored to President Barack Obama’s campaign promise to give workers a reduction of up to $1,000 by reducing Social Security payroll taxes. The Obama administration urged exclusion of the AMT provision when the House drafted its stimulus bill, House Ways and Means Committee Charles Rangel said last week.

Obama met with House and Senate Republicans at the Capitol today, and he told reporters that both parties should put politics aside to meet the urgent need for a stimulus. Several Republican lawmakers said afterward that the president didn’t overcome their objections to House Democrats’ plan.

Appropriations Committee

Also on the stimulus measure, the Senate Appropriations Committee approved providing $350 billion for initiatives including road and bridge improvements, and increased funds for education and unemployment benefits. The panel’s vote was 21-9, with four Republicans joining 17 Democrats to support the measure.

The committee’s top Republican, Senator Thad Cochran of Mississippi, voted for it. Still, he said he was “extremely wary” because he doubted the additional spending would do much to boost the economy.

“We are all searching for solutions that will help the economy,” said Cochran. “We are effectively being asked to take a leap of faith that this massive amount of spending will stimulate a suffering economy, despite evidence that much of the funding will not be spent in the next year or two.”

Also on Capitol Hill, Congressional Budget Office Director Doug Elmendorf told lawmakers the House version of the bill would provide a “substantial” boost to the economy.

Elmendorf, appearing before the House Budget Committee, said the plan would increase the U.S. gross domestic product by 1.2 percent to 3.5 percent by the fourth quarter of 2010, and that it would boost employment by between 1.2 million and 3.6 million jobs over that period.

Differing Cost Estimate

Elmendorf said the plan, which he pegged at $816 billion, would cost more than $1 trillion once interest payments on the debt resulting from the plan are included. Such payments would total $347 billion over the next 10 years, he said.

In the Senate Finance committee, lawmakers hailed the alternative minimum tax cut. “It’s not indexed for inflation, so it’s hurting the middle class,” New Jersey Senator Robert Menendez, a Democrat, said as he offered the tax-cut amendment. The provision would keep the number of households paying the levy steady at 4.2 million for 2009.

The AMT amendment was one of as many as 226 under consideration for the tax legislation, which would ease tax burdens on businesses by $128.1 billion this year and next. Another part of the bill would let companies convert losses into tax refunds and provide new relief from taxes on the value of forgiven corporate debt.

“Today we once again live in times that require action,” Finance Committee Chairman Max Baucus of Montana, a Democrat, said as the panel began its deliberations. “If we do not act, employment will fall by more than 2 percent in 2009.”

Renewable Energy

Republicans Jon Kyl of Arizona and Jim Bunning of Kentucky criticized the package, especially provisions providing billions of dollars to help states cover rising costs in government-run medical insurance programs.

“I fail to see how giving our state and local governments tens of billions of dollars pulls our economy out of recession,” Kyl said.

Bunning criticized Obama’s “Make Work Pay” credit, the tax package centerpiece that would give up to $500 per worker and $1,000 per household. He said it wasn’t designed to be an economic stimulus and would make lower-income people more dependent on the federal government.

The Senate plan also would provide almost $30 billion in tax incentives to producers of renewable energy, or $10 billion more than was approved by the House Ways and Means Committee. It doesn’t include a $7.7 billion program to convert tax credits into grants for renewable-energy producers. It would let small- business owners exclude more of their profits from capital gains taxes, a provision not in the House bill.

Health Benefits

The finance committee’s bill includes $180 billion in health and unemployment benefits and other spending to help states.

In addition to the alternative minimum tax relief, Baucus expanded the legislation to double to eight years the time companies can spread tax payments on the value of forgiven debt. That is a variation on more generous relief sought by business groups including the U.S. Chamber of Commerce.

Nevada Senator John Ensign, a Republican, sought instead a two-year window in which forgiven debt would be tax-free. “I don’t believe this bill goes far enough,” he said.

To contact the reporters on this story: Ryan J. Donmoyer in Washington at rdonmoyer@bloomberg.net; Brian Faler in Washington at bfaler@bloomberg.net

Last Updated: January 27, 2009 17:32 EST