Tax package appears headed for passage in Senate

WASHINGTON – Legislation aimed at avoiding sweeping tax increases Jan. 1 appears headed for approval in the Senate after negotiators added a few sweeteners to promote ethanol and other forms of alternative energy.

Tax provisions designed to increase production of hybrid automobiles, biodiesel fuel, energy-efficient homes, coal and energy-efficient household appliances would be extended through the end of 2011.

There is no precise timetable for passage in the Senate, but a test vote was set for Monday afternoon that appears likely to demonstrate overwhelming support for the legislation. Supporters say it would help accelerate a sluggish recovery from recession.

Action in the Senate comes even though House Democrats balked at the plan, voting in a closed-door meeting Thursday not to allow the package to reach the floor for a vote without changes to scale back tax relief for the rich.

"This bill is not perfect, but it provides the economic boost middle-class families and small businesses in Nevada and across America need," said Senate Majority Leader Harry Reid, D-Nev. "Middle-class families and small businesses will see their taxes go down."

Presidential press secretary Robert Gibbs said, "The deal will get passed."

The agreement hashed out by President Barack Obama and Republican lawmakers would extend tax breaks at all income levels that are due to expire on 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.

At the insistence of Republicans, it also includes a more generous estate tax provision. That infuriated Democrats already unhappy with Obama for agreeing to extend tax cuts at incomes of more than $200,000 for individuals and $250,000 for couples.

In all, the package would cost about $855 billion, according to a preliminary congressional estimate.

"If we pass this agreement as written, it says we are going to continue the Bush policy of trickle down economics for at least two more years, and in my mind, that is absurd," said Sen. Bernie Sanders, a Vermont independent.

Vice President Joe Biden has told Democrats in closed-door meetings this week that they are free to oppose the agreement but it might unravel if they do.

"If it's take it or leave it, we'll leave it," said Rep. Lloyd Doggett, D-Texas, after a closed-door meeting in which rank-and-file Democrats chanted, "Just say no."

Despite significant criticism from fellow Democrats, Obama has said the sweeping measure is necessary to help the struggling economy recover from the worst recession in decades.

Senate GOP leader Mitch McConnell has said he expects most Senate Republicans to support the tax bill. Prominent House Republicans back it, too.

Among the energy tax provisions added was an extension through 2011 for the current 45-cent per gallon subsidy for ethanol, at a cost to the Treasury estimated at nearly $5 billion. The issue is of particular interest to lawmakers from Midwestern states with grain crops.

"While this legislation is not as long as we had hoped, it is a commonsense approach that will ensure American ethanol production continues to evolve and new technologies commercialized," said Bob Dinneen, president of the Renewable Fuels Association.