Congress Close to Extending Some Tax Cuts

Republicans are moving ahead with efforts to extend three popular middle class tax cuts (search) that are set to expire at the end of this year and they have added a collection of expiring tax breaks for businesses to the package as well.

A joint House-Senate conference committee ironing out differences between the two chambers was scheduled to meet again Wednesday with the goal of wrapping up discussions on the tax relief package.

Republicans hope to win quick House passage of the proposals this week with Senate passage following early next week in their drive to hand President Bush a major legislative victory in the closing weeks of the presidential campaign.

Senate Finance Committee Chairman Charles Grassley (search), who is chairing the conference committee, expressed confidence the committee would be able to complete its work on Wednesday. Discussions were suspended at an initial meeting Tuesday to allow committee aides to correct a number of drafting errors that were discovered.

The measure would extend the $1,000 child tax credit, which had been scheduled to fall to $700 next year, preserve the current expanded 10 percent income tax bracket and retain a set of tax breaks to offset the so-called marriage penalty (search).

Preliminary staff estimates distributed to the committee members Tuesday night indicated that these middle class tax provisions would cost $120 billion over the next five years, including $22.6 billion to extend for one year relief from the alternative minimum tax (search), which was initially enacted to make sure the rich did not escape paying taxes but is now ensnaring more middle-income tax payers.

The total legislative package also included $11.4 billion to extend, generally for one year, various expiring corporate tax breaks including a research and development tax break. The cost over 10 years for the various provisions of the total package was put in preliminary estimates at $145.7 billion.

Democrats tried to amend the proposal to cover the costs of the tax extensions with increases in other taxes in an effort to keep the tax cuts from worsening government budget deficits. Those efforts failed on party-line votes with Republicans arguing that higher taxes would dampen economic growth.

Sen. Blanche Lincoln, D-Ark., lost in an initial effort to expand the availability of the child tax credit to some 4 million low-income families who do not earn enough currently to benefit from the $1,000 per child credit.

The decision to include various expiring tax breaks for businesses in the middle class tax package raised questions among Democrats over whether Republicans were giving up this year on an effort to pass a separate corporate tax bill that is needed to end penalty tariffs being imposed on U.S. exports to Europe.

House Ways and Means Committee Chairman William Thomas, seeking to allay concerns, said he was committed to getting the corporate tax bill finished this year and he said he expected that House Speaker Dennis Hastert would appoint House members for a joint conference committee within the next few days.

The corporate tax bill would replace $5 billion in annual tax breaks to U.S. exporters that have been ruled illegal by the World Trade Organization (search) with various other corporate tax breaks.