Some lawmakers to find gifts in tax-cut package

WASHINGTON - In the spirit of the holiday season, President Obama's tax-cut deal with Republicans is becoming a Christmas tree tinseled with gifts for lobbyists and lawmakers.

There are ethanol subsidies for rural folks, commuter tax breaks for their cousins in the cities and suburbs, wind and solar grants for the environmentalists - all aimed at winning votes, particularly from reluctant Democrats.

The holiday additions are being hung on the big bill that was Congress' main reason for spending December in Washington, long after the elections that will give Republicans new power in January. The measure will extend Bush-era tax cuts, averting big tax increases for nearly all Americans, and keep jobless benefits flowing.

Republicans generally liked that agreement, worked out by Obama and GOP leaders. Democrats generally didn't, hence the add-ons.

It's all expected to come to a decisive vote next week, with a total cost by the latest congressional estimate of $857.8 billion.

Almost $5 billion in subsidies for corn-based ethanol and a continuing tariff to protect against ethanol imports were wrapped up and placed on the tree Thursday night for farm-state lawmakers and agribusiness lobbyists. Environmentalists won more grants for developers of renewable energy, like wind and solar.

For urban lawmakers, there is a continuation of about-to-expire tax breaks that could save commuters who use mass transit about $1,000 a year.

Other popular tax provisions aimed at increasing production of hybrid automobiles, biodiesel fuel, coal and energy-efficient household appliances would be extended through the end of 2011 under the new add-ons.

The package also includes an extension of two Gulf Coast tax incentive programs enacted after Hurricane Katrina to spur economic development in Mississippi, Louisiana and Alabama.

The ethanol money was added despite a growing congressional opposition to subsidizing the fuel after decades of government support. Last month, 17 Republican and Democratic senators wrote to leaders calling the tax breaks "fiscally indefensible," since there is already a law in place that requires ethanol be blended into gasoline.

But ethanol still has powerful supporters on Capitol Hill, including Iowa Sen. Charles Grassley, the top Republican on the Senate Finance Committee and a key negotiator on the Senate tax bill. Adding the ethanol tax breaks was designed to help shore up the votes of many rural Democratic as well as Republican senators.

But while the add-ons may have won more votes for the Obama-GOP deal in the Senate, their potential impact is less clear in the House, where Democrats have criticized the package as a tax giveaway to the rich.

Rep. Collin Peterson, a conservative Democrat from Minnesota, says he would have voted against the bill if it had contained some of the clean-energy tax incentives and nothing for ethanol. "I know this will help some members in the House," he said.

A spokesman for Rep. Earl Blumenauer (D., Ore.), a leader in the effort to win tax credits for wind and solar energy, said the congressman still hasn't been won over yet on that package. He said the extension was necessary but not sufficient for Blumenauer's support. "His vote will depend on what the final version looks like," spokesman Derek Schlickeisen said.

Rep. Jay Inslee (D., Wash.) also was not won over by the renewable-energy extension, despite being a big supporter of the program. "It's one of the best things we have in the federal government for job creation. It is incredibly important. . . . I think there's a better deal out there potentially available, and we ought to fight for it," he said.

There's the possibility the added goodies could have the opposite effect intended for some lawmakers. Rep. Jeff Flake (R., Ariz.) said the add-ons could turn his fiscally conservative colleagues against the bill.

"You don't want to be accused out there of supporting stimulus three," he said. "It will knock some votes off in the House, but more than anything it will show the voters out there that things haven't changed with Republicans."