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Tax breaks big and small sweeten financial bailout
The Associated Press
By Jim Abrams, Associated Press Writer
Published on Friday, October 03, 2008
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WASHINGTON - Millions of taxpayers, thousands of businesses and
groups as diverse as solar power developers and natural disaster victims
will see tax relief with the House vote Friday to approve and send to
the president a $700 billion financial rescue plan.
The tax relief package attached to the rescue bill promotes renewable
energy development and extends dozens of tax breaks from the critical
research and development tax credit to breaks for such narrowly focused
groups as motor sports racetrack owners, film producers and bicycle
commuters.
The renewable energy part of the package alone, House Speaker Nancy
Pelosi said, will "create and save half-a-million good-paying jobs in
America immediately."
Virtually all of the tax breaks already exist. But many of them expired
Jan. 1 for use in the current tax year, and the others will expire three
months from now unless Congress renews them.
The largest group of beneficiaries in the tax portion of the financial
rescue bill is about 20 million mainly upper-middle income taxpayers.
Without congressional action, the AMT, with originally was supposed
to affect only the very rich, would add some $2,000 this year to the tax
bill of these people, most earning under $200,000 a year.
Thousands of businesses are waiting for renewal of the research and
development tax credit, which expired at the end of last year. Without
that credit, industry advocates say, high tech, biotech and aerospace
companies would have trouble hiring the highly skilled workers needed
to compete with foreign competitors.
The Information Technology Association of America reports an $18.5
billion drop in R&D activity since the beginning of the year, when the
credit lapsed. The R&D credit extension would cost $19 billion over 10
years. The cost of the entire tax portion of the bill is close to $110
billion.
The renewable energy incentives include an eight-year extension of
investment credits for solar energy, as well as breaks for wind,
geothermal and other alternative sources. The solar industry says
extension of the credits through 2016 would produce an extra 440,000
jobs and more than $230 billion in investments.
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U.S. President George W. Bush makes a
statement after the U.S. Congress approved a
$700 billion bailout package for U.S. banks
as efforts to head off a spreading global
financial crisis hung in the balance, in
Washington October 3, 2008. Bush welcomed
the passage of a $700 billion financial rescue
package by the House of Representatives on
Friday and promised to sign the bill into law
as soon as he receives it.
REUTERS/Mike Theiler (UNITED STATES)
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Slideshow: Economic Bailout Plan
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The measure also has $8 billion in tax breaks for disaster victims, $5 billion for higher education tuition deductions and $400
million in deductions for teachers who buy school supplies with their own money.
There are $3 billion in deductions for residents of states without income taxes that have state and local sales taxes. Extending the
deduction would save Texans a projected $1.2 billion a year or an average of $520 per filer claiming the deduction, said Matt
Mackowiak, spokesman for Sen. Kay Bailey Hutchison, R-Texas.
There are also some four dozen small provisions. Among them, with projected costs over 10 years:
_Extending an expired provision that gives Puerto Rico and the Virgin Islands a rebate against excise taxes charged on imported
rum. The rebate, at $13.50 per proof gallon, helps finance local infrastructure projects. The cost is $192 million.
_Establishing a new tax credit ranging from $2,500 to $7,500 for purchasers of plug-in electric-drive vehicles. Cost: $758 million.
_Extending tax credits that expired at the end of 2007 for certain domestic corporations involved in American Samoa economic
development. Cost: $33 million.
_Extending a credit of up to $10,000 for the training of mine rescue team members. The credit expires at the end of this year and
the one-year extension costs $4 million.
_Enacting President Bush's proposal to erase the debt of the black lung disability trust fund at a cost of $1.3 billion.
_Extending for one year a seven-year depreciation timetable that NASCAR and other motorsport racing facilities have had for
some years, the same tax break that amusement parks enjoy. Without the extension, the tracks would have to depreciate the cost
of their improvements over 15 years, raising their taxes by $100 million.
_Extending for five years a program that reduces import duties on some wool fabrics. The tariff relief benefits U.S. worsted
wool fabric producers that use imported fibers and yarns. Cost: $148 million.
_Increasing the single-year deduction in production costs, from $15 million to $20 million, that film and TV productions may
take if the costs are incurred in economically depressed areas. In an effort to keep film and TV productions in the U.S., it also
allows more companies to use a domestic production deduction. Cost: $478 million.
_Allowing commercial fishermen and others hurt by the 1989 Exxon Valdez oil spill in Alaska to average out damage awards
over three years rather than taking a one-year hit from the IRS. Cost: $49 million.
_Extending two programs that fund rural schools and rural communities that have been relying on declining income from logging
on federal land or have low property tax bases because they are located on or next to federal lands. This is a major issue in the
West. Cost: $3.3 billion.
_Exempting wooden practice arrows used by children from an excise tax of 39 cents per arrow. Oregon's two senators and two
Wisconsin representatives previously introduced legislation calling for the action, saying the tax was meant for more expensive
archery arrows and is untenable for makers of toy arrows that may cost only about 30 cents apiece. The bill would affect about
a half-dozen manufacturers nationwide, including one in Oregon; the Oregon senators said they didn't seek its addition to the
bailout, however. Cost: $2 million.
_Allowing employers to exempt from taxation what they spend on some fringe benefits for workers who commute to work by
bicycle, for example reimbursing the cost of parking the bikes. Cost: $2 million.
Some House members and radio-TV commentators have called for eliminating several of the measures, including those affecting
wooden arrows, Puerto Rican rum, racetracks and film producers.
"All these things are called sweeteners in order to get votes from Democrats and Republicans in the House," conservative
commentator Rush Limbaugh said at the opening of his show Thursday. "To get this bailout through the Senate and House,
they've added pork. Surprise, surprise."
(source: Yahoo News)
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