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Tax package has breaks for banks, manufacturers, teachers, working poor; few goodies are new

WASHINGTON – From finance companies and manufacturers to teachers and the working poor, there is a tax break for almost everyone in the massive package unveiled by congressional leaders.

But don’t get too excited. Only a few of those breaks are new.

Most have been around for years — even decades — and are renewed every year or two, but only temporarily. More than 50 of the tax breaks expired at the start of the year.

The package would make more than 20 of them permanent, providing certainty to millions of businesses and individuals. The other breaks would be extended for shorter periods.

Business leaders have been complaining for years that they can’t be certain from year to year that their tax breaks will be renewed.

“I cannot tell you how many times I’ve visited with small businesses and farmers who tell me, ‘Give me some certainty in the tax code and I can go create jobs,'” said House Speaker Paul Ryan, R-Wis. “I’m excited about this huge win for families, for job creators, for certainty for our economy. I really think this is going to help us grow our economy.”

The bill would save taxpayers about $680 billion over the next decade, according to congressional estimates. That cumulative amount would add to the national debt.

“It’s a significant tax relief measure and of course you know how Republicans like to cut taxes,” said Senate Majority Leader Mitch McConnell, R-Ky.

House Minority Leader Nancy Pelosi, D-Calif., said the package costs too much and favours businesses over families.

“In my view this is practically an immorality in terms of what it does, how it damages the future,” Pelosi said Wednesday.

The White House indicated that President Barack Obama would sign the bill.

“We are pleased that the deal will permanently extend tax credits that help working families make ends meet and pay for college, benefiting 24 million families a year,” said White House spokeswoman Jen Friedman.

The tax package was negotiated mainly by Republicans from the House and Senate and Democrats from the Senate. It is unclear how many House Democrats will support it.

Ryan said the House will vote on the tax bill Thursday, sending it to the Senate.

The package would let people who live in states without income taxes continue deducting local sales taxes when they file their federal returns. College students could keep their $2,500 tax credit for school expenses. Low-income people with three or more children could continue to claim a larger Earned Income Tax Credit.

Families that don’t make enough money to pay federal income tax could continue to claim larger child tax credits.

Teachers could continue to deduct up to $250 a year if they spend their own money on classroom supplies and commuters could keep getting tax-free transit benefits from their employers.

Business groups praised the package, which would continue generous tax breaks for international finance firms, retailers and companies that spend a lot on research and development.

The generous R&D tax credit has been around since the 1980s, but it has always been temporary. The bill would expand it and make it permanent. The provision would save businesses $113 billion over the next decade, making it the single biggest tax break in the package.

Several provisions allow businesses to more quickly write off expenses for buying computers or equipment or to finance property upgrades. These provisions are important to restaurants and retailers.

Others make it easier for businesses and retirees to make tax-free charitable donations.

Still others encourage the use of alternative energy, including a tax credit for producing energy from wind.

Many of the tax breaks are obscure, including ones that benefit race horse owners, film producers and rum makers in Puerto Rico and the Virgin Islands.

Sen. Ron Wyden. D-Ore., has long championed a tax break for companies that make electric motorcycles (Oregon-based Brammo makes them). House Republicans killed the tax break last year after they blamed Wyden for helping to nix negotiations over a similar tax package.

The tax break would be revived and extended through 2016 in the new package.

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Associated Press writers Matthew Daly, Donna Cassata. Erica Werner and Josh Lederman contributed to this report.

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