WASHINGTON – The Senate on Friday supported tax breaks to ailing Rust Belt manufacturers and Gulf Coast residents receiving grants to rebuild homes destroyed by Hurricane Katrina.
The twin amendments were the first add-ons to a bill aimed at easing the crisis in the housing market. The measure is slated to pass next week.
By a 76-2 vote, senators approved a plan by George Voinovich, R-Ohio, and Debbie Stabenow, D-Mich., to allow money-losing companies to use already accumulated tax credits to help offset new investments in plants and equipment. Companies across the country would be helped, but the Rust Belt lawmakers said the problem is particularly acute in their region.
Such businesses did not benefit from pro-business tax breaks included in February's economic stimulus measure that were available only to companies making profits.
Then, by a 74-5 vote, the Senate approved an amendment by Mary Landrieu, D-La., to ensure that residents of Louisiana and Mississippi who receive home rebuilding grants don't have to pay taxes on them.
Senators then lined up to try to offer more tax breaks to the legislation, which is billed as helping homeowners facing foreclosure but awards the overwhelming share of its tax breaks to businesses such as lenders and homebuilders.
Sen. Ben Cardin, D-Md., wants to give a temporary $7,000 credit to first-time home buyers and a plan by Sens. Bill Nelson, D-Fla., and Norm Coleman, R-Minn., would let homeowners who are late on their mortgage payments withdraw money penalty-free from their retirement accounts to avoid foreclosure.
Sens. John Ensign, R-Nev., and Maria Cantwell, D-Wash., pressed a plan to extend $6 billion worth of tax breaks for renewable energy producers but met stiff resistance from bill manager Christopher Dodd., D-Conn.
"This is not a Christmas tree," Dodd thundered. "It's a housing bill."
Majority Leader Harry Reid, D-Nev., promised the Senate will wrap up the measure next week.
The underlying bill contains an amalgam of provisions aimed at easing the current crisis.
The largest provision by far would allow lenders and homebuilders who made big profits earlier in the decade but are losing money now to reclaim taxes paid up to four years ago. The provision, dropped from February's economic stimulus bill as too costly, would award $25 billion to money-losing businesses through 2010.
Other tax cuts, including a $7,000 tax credit for people purchasing a foreclosed home and property tax deductions for people who do not itemize their deductions, total about $3 billion over the same period.
The measure contains a rewrite of Federal Housing Administration law that would permanently raise the dollar limit on mortgages that FHA can insure to $550,000 in the most costly real estate markets. The economic stimulus bill approved by Congress in February temporarily raised the limit from $362,790 to $729,750.
It also contains $4 billion to help cities and towns buy up and refurbish foreclosed and abandoned homes. The idea is to stabilize communities and preserve values of neighboring homes.
There's also another $100 million to provide counseling to people threatened with foreclosure and help them in negotiating with their lenders. The measure also would provide new authority for states to issue $10 billion worth of bonds to be used to refinance subprime mortgages, though it would take some time for the plan to take effect.
The bill also toughens truth-in-lending laws to try to make sure borrowers have a clearer understanding of the terms of their mortgages.