Feuding Senate Searches for Accord on Lapsed Tax Breaks

U.S. Senate Democrats want to pass a package of more than $80 billion in business tax breaks.

Republicans are basically on board -- though a simmering feud over their attempts to make changes to legislation could stop the measure from moving to a final vote.

Senators voted 96-3 today to advance the plan, which would reinstate dozens of breaks that lapsed Dec. 31 and extend them through 2015. Tax benefits in the package would allow companies such as General Electric Co. to defer U.S. taxes on overseas financing income and reinstate the production tax credit for wind energy.

Republicans support most of the breaks, which aren’t paired with spending cuts or tax increases. What they want is the chance to vote on potential changes, and if they stick together, they have the power to block the bill from getting the 60 votes needed to advance further.

“The package all together has, on the merits, more than 60 votes,” said Rohit Kumar, co-leader of tax policy services at PricewaterhouseCoopers LLP in Washington and a former aide to Senate Republican Leader Mitch McConnell. “But the merits and the process are two separate issues. As we’ve seen so many times in recent history, both have to be satisfied.”

The Senate Finance Committee approved the bill in a bipartisan voice vote last month.

Republicans’ Chance

Senate floor amendments are the Republicans’ opportunity to make changes to legislation or force Democrats to take potentially unpopular votes. Though they’re in the minority, Republicans’ strategy matters because at least five members are needed to join Democrats on votes to move the bill ahead.

The number of Republicans needed to back the measure could rise if some Democrats object to the lack of offsets. The proposal would increase the U.S. budget deficit by $84.1 billion over the next decade.

Republicans are insisting on covering the cost of Democrats’ proposed extension of expanded unemployment benefits, which Democrats call an unfair double standard. That means the hardest vote to attract 60 senators could be one to waive budget rules, said Russ Sullivan, a former Democratic staff director for the Senate Finance Committee, now an adviser at McGuireWoods Consulting in Washington.

Also in the package are an extension of the research and development tax credit, the ability for individuals to deduct state sales taxes and the 50 percent bonus depreciation for capital investments.

Medical-Device Tax

Republican amendments could include repeal of the excise tax on medical devices, other changes to taxes imposed by the 2010 health care law and proposals to end tax subsidies for energy, said a Senate Republican aide, speaking on condition of anonymity to discuss plans that haven’t been finalized.

Repealing the device tax, which attracted support from 79 senators in a test vote last year, may not be considered, said J.C. Scott, senior executive vice president for government affairs at AdvaMed. The device-industry trade group’s board of directors includes executives from Hospira Inc. and Medtronic Inc.

“The process that is shaping up in the Senate is going to limit opportunities for discussion,” Scott said.

Senator Patty Murray of Washington state, a member of the Democratic leadership, said today that lawmakers are still deciding on how to proceed with potential amendments.

Making Permanent

Senator John Cornyn of Texas, the second-ranking Republican, said Republicans would be offering proposals to make some of the breaks permanent.

“There’s a lot of good policy in this and there’s some bad policy in it,” he said.

Disputes over amendments have been snarling other measures in the Senate, as Republicans in the minority complain about their inability to shape legislation and Democrats in the majority say Republicans won’t work with them constructively.

Yesterday, that squabble scuttled an energy-efficiency bill.

“Republican obstruction is bringing the Senate to its knees again and again,” said Senate Majority Leader Harry Reid, a Nevada Democrat.

The tax bill may be different, Kumar said, because it’s filled with specific provisions backed by Republicans.

For example, Senator Charles Grassley of Iowa supports the extension of the wind energy credit. Senator Richard Burr of North Carolina cosponsored a bill to extend accelerated depreciation for motor sports tracks.

‘Of Interest’

“Each state, there’s something in this package that is of interest to you,” Kumar said.

There will be lots of talk about possible amendments and still, the tax bill will pass unchanged by the end of the month, said a Senate Democratic aide who isn’t authorized to speak publicly.

Even if the Senate passes the tax bill, its fate is far from certain in the Republican-led House of Representatives.

House lawmakers have taken a different approach, breaking out individual tax provisions and offering proposals to make them permanent. The first such bill, on the research credit, passed the House 274-131 on May 9 with 62 Democrats joining Republicans to support the measure.

House leaders object to some of the tax breaks, particularly those for renewable energy.

Solar Credits

When looking at how generous wind and solar tax credits are, “you’ve really got to scratch your head,” House Speaker John Boehner, an Ohio Republican, said yesterday in a speech in San Antonio.

Groups supporting the Senate bill include the Business Roundtable and Americans for Tax Reform, led by anti-tax activist Grover Norquist.

“Warts and all, the Senate should pass the tax extenders bill,” Norquist’s group said in a statement. “Ideally, the best of these tax relief items would be made permanent law, and the rest would be plowed into pro-growth tax reform. For now, though, the mandate for the Senate is clear: do no harm.”

The bill is H.R. 3474.

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