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House passes tax package; hurdles ahead

Democrats say it will help middle-class families. Republicans oppose how it would be paid for.

WASHINGTON - The House yesterday passed a $54 billion tax package that Democratic backers said would help relieve dependence on imported oil while easing the economic strain on parents, homeowners and businesses.

The wide-ranging legislation passed, 263-160, sending it to the Senate and an uncertain future. Most Republicans opposed it because it is paid for by requiring some corporations with offshore offices to pay more taxes and does not address shielding taxpayers from the alternative minimum tax. The White House, citing those factors, threatened a veto.

The measure renews dozens of targeted tax breaks that have expired or will expire soon, and it expands for a year the refundable child-tax credit available to lower-income families.

It also allows, for one year, a new deduction of property taxes for non-itemizers, worth up to $700 for a couple.

"It would cut taxes for millions of middle-income families," said House Speaker Nancy Pelosi (D., Calif.). She said that 30 million homeowners would benefit from the property-tax credit, that the refundable tax credit would help the parents of 13 million children, and that renewal of a deduction for tuition and other education costs would benefit 4.5 million families.

An additional 11 million would be affected by extending deductions for state and local sales taxes, she said.

The bill also extends deductions for the out-of-pocket expenses of teachers and allows tax-free deductions from individual retirement accounts.

The measure provides $17 billion in tax incentives for renewable energy sources such as wind and solar power, carbon capture and sequestration projects, plug-in cars and green-building technology. It provides $8.8 billion over 10 years to renew the research and development tax credit.

It also creates a new category of tax credit bonds to finance state and local government initiatives to reduce greenhouse-gas emissions.

Ways and Means Committee Chairman Charles B. Rangel (D., N.Y.) said the bill would reverse the trend of the nation's "addiction to oil and the lack of will to do anything about it."

Republicans protested a new tax credit that would give a more generous deduction to attorneys who pay litigation costs in advance in contingency-fee cases. That credit would cost an estimated $1.6 billion over 10 years.

But the main protests concerned the $54 billion in so-called offsets - new sources of money to pay for the legislation. One would close a loophole that allows hedge-fund managers and others working for offshore corporations to defer tax on their compensation, and another would delay implementing a tax break for multinational corporations operating overseas.

"There is no need to raise taxes to prevent a tax increase," said Minority Leader John A. Boehner (R., Ohio).

Republicans also scolded the Democrats for putting off the issue of the alternative minimum tax, which was created in 1969 to catch a small number of very rich tax dodgers. Because the AMT was never adjusted for inflation, it affects more upper-middle-class and middle-class taxpayers every year unless Congress acts to prevent that.

Without a fix this year, Republicans said, the number of those affected would grow from about 4 million to 25 million, at an average added tax burden of about $2,400.

Rep. Jim McCrery of Louisiana, top Republican on Ways and Means, said, "This neglect, I think, is the single largest flaw in the bill."

Rangel and other Democratic leaders stressed that they would deal with the AMT this year.

How They Voted

Representatives from the Philadelphia area who voted for the bill containing tax breaks and energy incentives were Robert E. Andrews (D., N.J.), Robert A. Brady (D., Pa.), Michael N. Castle (R., Del.), Charles W. Dent (R., Pa.) Chaka Fattah (D., Pa.), Jim Gerlach (R., Pa.), Tim Holden (D., Pa.), Frank A. LoBiondo (R., N.J.), Patrick Murphy (D., Pa.), Allyson Y. Schwartz (D., Pa.), Joe Sestak (D., Pa.), and Christopher H. Smith (R., N.J.).

Voting against the bill were Joseph R. Pitts

(R., Pa.) and H. James Saxton (R., N.J.).