Subsidies for ethanol added to tax bill

WASHINGTON - Seeking support for a controversial tax-cut compromise, the White House and key lawmakers agreed to renew expiring breaks for ethanol and other forms of alternative energy yesterday as part of a bill to prevent a spike in income taxes Jan. 1.

Tax provisions aimed at increasing production of hybrid automobiles, biodiesel fuel, energy-efficient homes, coal and energy-efficient household appliances would be extended through the end of 2011 under the bill, according to a summary describing the outlines of the expanded bill.

The summary circulated as the White House predicted that the deal President Barack Obama struck with top Republicans would clear by year's end - even though House Democrats voted yesterday not to allow it to reach the floor for a vote without changes to scale back tax relief for the wealthy.

"If it's take it or leave it, we'll leave it," said Rep. Lloyd Doggett, D-Texas.

As announced by Obama on Monday, the deal would extend tax breaks at all income levels that are due to expire Jan. 1, renew a program of jobless benefits for the long-term unemployed that is due to lapse within days and implement a one-year cut in Social Security taxes.

The two-year cost of the plan, estimated at as much as $900 billion, would further swell record federal deficits.

Despite the additional red ink, the president has said the plan is essential to add strength to an economy recovering slowly from the worst recession in eight decades. Joblessness stands at 9.8 percent, and a top White House official bluntly warned Democrats earlier in the week that they would bear responsibility for a return to recession if they blocked the measure.

Senate Republican leader Mitch McConnell has said he expects most of his rank and file to support the bill. Prominent House Republicans back it, too, although they generally have refrained from speaking at this time.

Rep. John Boehner of West Chester, in line to become speaker when Republicans take control of the House in January, "supports the framework as agreed to by" Obama and McConnell and spoke with the president about it over the weekend, a spokesman said yesterday.

It was unclear precisely what changes House Democrats would seek, but much of the criticism focused on a provision that would cut taxes on large estates.

Speaker Nancy Pelosi, D-Calif., said, "That was a bridge too far for many of our members" already upset about Obama's decision to bow to Republican demands for extending tax cuts on individuals making more than $200,000 and couples earning more than $250,000.

Under the estate-tax provision, the first $5 million of a couple's estate could pass to heirs without taxation, and an additional $5 million for the spouse. The balance would be subject to a 35percent tax rate.

According to a Tax Policy Center estimate based on census data, that would mean only about 3,500 estates would be liable for taxes in 2011, out of more than 2.5million forecast to be filed. Barring legislation, about 44,000 estates would be subjected to taxation in 2011, the groups said.

Meanwhile, Congress acted on two other items yesterday.

Facing GOP objections, Senate Democrats put aside the DREAM Act and said they'd try again to advance it before year's end.

The bill grants hundreds of thousands of undocumented immigrants brought to the United States as children a chance to gain legal status if they enroll in college or join the military.

Republican senators blocked Democratic legislation that sought to provide medical care to rescue workers and others who became ill as a result of breathing in toxic fumes, dust and smoke at the site of the 9/11 World Trade Center attack.

Supporters think this was their last opportunity to pass the bill.

source: dispatchpolitics