A wait to see if tax breaks will swing bailout vote
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WASHINGTON - The House of Representatives is expected to vote today on a revamped version of President Bush's sweeping $700 billion economic rescue package, which has grown to include more than $100 billion in tax provisions that affect everything from Puerto Rican rum imports to motor racing speedways, mental health coverage and the alternative minimum tax.
Those provisions - "sweeteners" the Senate added to push the bill through the House - have convinced several lawmakers, who helped defeat it, to change their minds. By yesterday, however, the add-ons had failed to convince some members, further irritated others, and no one on Capitol Hill was bold enough to predict the bill's fate.
"I'm optimistic that we will take a bill to the floor," said House Speaker Nancy Pelosi, a California Democrat. The bill wouldn't reach the floor for a vote, she added, unless the odds were high that enough members would approve it.
And several of the proposals were designed to make it tough for some members to say no.
One benefit seemed to be aimed specifically at Representative Mike Thompson, a Democrat of California, who has backed the auto racing tax break and was among 95 House Democrats who voted down the rescue package.
Thompson declined a request for an interview, and his office would not say how he plans to vote today.
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A spokeswoman for Thompson said the racing industry would find it harder to build new racetracks without the tax break, but government watchdog groups were skeptical that the raceway tax break - which would allow owners to write off expenses over seven years instead of 15 years - is needed.
"Auto track owners are simply trying to get out of paying more taxes, which they'd have to do if they deducted less every year," according to Taxpayers for Common Sense, a public-interest group. "These owners have gotten plenty of tax breaks over the years from states and localities eager to get speedways."
The core of the financial rescue package remains the same: granting Treasury Secretary Henry Paulson wide latitude to buy or insure bad mortgage-related debt from shaky Wall Street firms. That is intended to help restore confidence to US and worldwide stock markets and relieve a credit crunch that has caused major financial institutions to fail, stalled retail sales, and made it increasingly difficult for consumers and business to borrow money.
On Monday afternoon, the House rejected the basic version of the bill, despite dire warnings from Bush and Paulson. Wall Street then plunged by a record 777.68 points, triggering chaos in global financial markets worldwide and spurring the Senate to resurrect the bill Wednesday night.
The version the House will now consider has tax breaks for corporate research and development projects and an "enhanced charitable deduction" for people who donate books to public schools. A number of lawmakers who voted against the bill on Monday said they planned to vote for it today.
Among the more noteworthy items in the package is a provision for the taxation of rum from Puerto Rico and the US Virgin Islands. Under the bill, the governments of the two US territories would get to keep all but 25 cents of a $13.50 per-gallon tax for rum purchased on the American mainland - a benefit worth as much as $300 million.
Jaime Gonzalez, a senior aide to Luis Fortuño, Puerto Rico's congressional representative, said the measure was added to "expedite" a routine matter that is usually approved at the end of a congressional session. Puerto Rico's representative does not vote in the full House.
Support for some of the add-ons began at the top: Pelosi, a California Democrat, applauded the extension of roughly $15 billion in tax breaks for companies that create ways to use solar and wind energy, which she called one of her "flagship" issues.
But the bill also included about $1.5 billion in tax-break extensions for oil, gas, and coal manufacture and production - including benefits for an as-yet-developed program to transform coal into liquid fuel.
"It's the historical Catch-22 on energy legislation," said Steve Ellis, vice president of Taxpayers for Common Sense, an independent watchdog group. The clean energy industry, he said, "is looking for tax credits, and the big guys are, too. But it's probably not a level playing field" because the traditional energy industry has more political clout.
Representative Jim Ramstad, a Minnesota Republican, said he would switch from a no vote to a yes vote partly because the legislation includes benefits for one of his top priorities: medical insurance parity for mental health patients, along with "major tax relief."
The changes "caused me to reconsider my position," Ramstad said in a statement. "The revised bill is a recovery bill for the economy and a recovery bill for millions of Americans suffering the ravages of mental illness and addiction."
One eyebrow-raising provision in the revamped bill is the suspension of a 39-cent excise tax on arrows made from natural wood, which had been backed by Senators Ron Wyden and Gordon Smith of Oregon; the tax relief would benefit Rose City Archery in Myrtle Point, Ore., among others. Overall it is estimated to cost taxpayers $2 million in lost revenue over 10 years. Myrtle Point is represented in the House by Peter DeFazio, a Democrat who voted against the bailout plan on Monday.
Not all of the lawmakers who saw items from their "wish-list" included on the bill said it was enough to change their minds.
Representative Brad Sherman, a California Democrat, said the Senate version of the bill contains some tax changes that "aren't too bad," including a system to recoup some of the $700 billion through corporate taxes. Nevertheless, he said he "absolutely" will not change his vote from no to yes and help approve a bad solution to the financial crisis.
"We don't have to panic. The panic-mongers were to the point of telling people the market would drop 3,000 points and there would be martial law" on Wall Street, Sherman said. "The exaggerated fear-mongering turned out not to be true. We can draft a good bill. There are much better approaches."
Of the three House Democrats from Massachusetts who rejected the package on Monday, Stephen Lynch and William Delahunt both said they would continue to vote no. John Tierney said through a spokesman he was studying it.
Many of the additions to the bill are legislative favorites, particularly a "fix" of the alternative minimum tax. The levy was originally designed to prevent the wealthy from abusing tax exemptions, but inflation over time would move 20 million middle-income taxpayers into that category without the fix.
