Republicans labored to advance their tax cut agenda on Tuesday, with Senate tax writers unable to muster enough GOP support to extend tax cuts for capital gains and dividends beyond their 2008 expiration.

The House's top tax writer pushed to keep the 15 percent maximum rate on investment income alive for two more years, but dropped virtually every other extension of expiring tax breaks from a drafted bill.

The two tax bills, under debate in the House and Senate tax-writing committees, are different versions of a tax cut outlined in a budget this winter. Republicans want to use the legislation to keep one of President Bush's priorities, the reduced rates on capital gains and dividends income, in place as long as possible.

Without a change, the maximum tax rate on investment income will increase to 20 percent in 2009.

Senate Finance Committee Chairman Charles Grassley, R-Iowa, abandoned plans to keep the tax breaks on capital gains and dividends in place for one extra year. Grassley was stymied by resistance from Sen. Olympia Snowe of Maine, a moderate Republican who wouldn't support the extension.

Without her vote, Grassley could not muster enough GOP support to pass his bill.

The new version of Grassley's bill cuts taxes, goes after tax shelters and tightens tax breaks for charitable deductions. Overall, it would cost the U.S. Treasury $59.6 billion over five years.

The tax breaks include a new deduction for taxpayers who donate more than $250 to charity during the year.

Grassley makes that tax deduction available to everyone, whether they itemize their deductions or not. But taxpayers who currently itemize deductions would lose some of the current advantage for charitable donations. They would be allowed to deduct only donations exceeding $250.

New curbs on tax breaks for charitable donations include many identified by IRS officials as potentially abusive. Those changes include new limitations on charitable donations of clothing and household goods intended to prevent taxpayers from taking inflated tax deductions by overvaluing their used goods. Grassley would require the Treasury Department to determine the average value of clothing and household items.

Oil companies would be hit with a change that would cost them nearly $5 billion over five years. New accounting rules would apply to oil companies with gross receipts exceeding $1 billion and require them to factor the price of crude oil into the value of their inventory.

House Ways and Means Chairman Bill Thomas, R-Calif., introduced a new version of his tax cut proposal, eliminating many of the items included in a version released last week.

Thomas stripped out extensions of tax breaks due to expire shortly, including a deduction for state and local sales taxes, a credit for business research and development, a tuition deduction, a deduction for teachers who buy classroom supplies and equipment expensing for small businesses.

The bill can be amended to reinsert those or other tax breaks.

The Senate's tax bill includes a patch preventing the alternative minimum tax from hitting millions of taxpayers next year, an item missing from the House bill.

The alternative minimum tax aims to prevent wealthy individuals from avoiding all taxation. The annual effects of inflation have brought it closer to less wealthy taxpayers each year. Those with several children and those who live in states with high income and property taxes are more likely to feel its pinch.