U.S. News

House Passes Tax, Energy Bill


The House of Representatives has approved legislation that extends popular tax breaks, opens the Gulf of Mexico to new oil and gas drilling and cancels a scheduled pay cut for doctors who treat the elderly under Medicare.

A 367-45 majority of the House voted for the legislation, one of the few remaining bills the Republican-led Congress hopes send to President George W. Bush before adjourning. The lawmakers were then expected to quickly take up a companion trade bill that will be joined with the tax measure and sent to the U.S. Senate.

The bill, which will cost the federal treasury about $40 billion over five years, extends tax breaks for research and development and other popular causes, cancels a Medicare pay cut for doctors next year and opens some 8.3 million acres in the eastern Gulf of Mexico near Florida to new oil and gas drilling.

Whether the Senate could vote on Friday was in doubt, however, because of concern about spending and lingering opposition to trade provisions among senators from states with large textile industries.

The tax measure includes $38 billion in tax breaks for businesses, higher education costs and schoolteachers as well as credits for alternative energy initiatives.

Congress must also act on a bill to keep federal programs funded through next February, concluding its work for the year. With that, the Republican control of Congress, lasting 12 years in the House, would be over, setting the stage for the 110th Congress to convene in January with Democrats in the majority in both the House and the Senate.

In one sign of the approaching Democratic rise to power, future House Speaker Nancy Pelosi, D-Calif., and incoming Senate Majority Leader Harry Reid, D-Nev., succeeded in attaching to the funding bill language stopping until Feb. 16 an automatic pay raise members of Congress were to receive on Jan. 1.

They said no pay raise should be enacted until Congress approves an increase in the federal minimum wage, which has been stuck at $5.15 an hour for the past 10 years. If the pay raise goes into effect Feb. 16, members would lose some $320 of their anticipated $2,800 annual increase. That raise would be $3,300 if Congress acts to boost the cost-of-living allowances for all federal employees in 2007. Currently, rank-and-file members get $165,200.

The House was also debating an agreement to allow U.S. shipments of civilian nuclear fuel to India, an administration priority that is opposed by some because India, which has nuclear weapons, has not submitted to full international inspections.

The House approved by a voice vote a bill to keep open a special investigative office that has unearthed millions of dollars in waste and fraud in the rebuilding of Iraq. The office, which was set to end operations by October 2007, would stay open for an extra year under the bill, passed earlier by the Senate.

As is often the case at the end of the session, congressional leaders tried to lump popular items -- extending the expired or expiring tax breaks -- with other more contentious measures.

The trade portion establishes permanent normal trade relations with Vietnam, which is generally supported, with the extension of trade benefits for sub-Saharan Africa, Haiti and Andean nations. The Haiti provisions in particular raised red flags with lawmakers trying to protect home state textile industries.

Eight GOP senators from North and South Carolina, Georgia, Alabama and Kentucky on Thursday wrote congressional leaders saying 100,000 textile jobs in their region had already been lost due to trade agreements and they would oppose "as forcefully as possible" the Haiti measure.

Senate Budget Committee Chairman Judd Gregg, R-N.H., characterized the package as a "lump of coal in the taxpayers' stocking," saying it would add nearly $40 billion to the federal deficit over the next five years.

Attached to the tax measures was a move to block the administration from imposing a 5% cut in Medicare payments to doctors. The $4.5 billion cost was lower than earlier estimates of more than $10 billion a year, but would result in a 10% cut in doctors' fees in 2008 -- which would be even more costly to fix.

The search for ways to pay for this and other expensive programs raised other problems. Some lawmakers objected to a plan to ease budget shortfalls in a federal-state program providing health insurance coverage to low-income children. New Yorkers were angry when Republicans dropped tax incentives for a rail link from Manhattan to John F. Kennedy International Airport.

Under Senate rules, a single senator can force considerable delay once a bill comes over from the House.

Also included is a bill to expand federal contributions to an abandoned mine reclamation program, which could cost some $5 billion over 10 years.

The legislation also promotes energy independence by opening up some 8.3 million acres in the Gulf of Mexico to oil and gas drilling.

"This package could face obstacles to passage in the Senate, and I will be working with senators to find the smoothest path for the Senate to decide to take final action," said Senate Majority Leader Bill Frist, R-Tenn., who will relinquish his title and retire from the Senate when Congress adjourns.

The tax breaks, several which expired on Jan. 1, include a deduction of up to $4,000 for higher education costs, a 20% credit for new research and development activities, and a deduction of $250 for teachers who pay for school supplies with their own money.

Taxpayers in seven states without income states will again be allowed to deduct state and local sales taxes. "This saves our Texas taxpayers $1 billion a year," said Republican Rep. Kevin Brady of Texas, one of the seven states.

The bill also extends through 2008 various energy provisions now set to expire at the end of 2007, including tax credits for electricity produced from renewable resources, and for new energy-efficient homes.

As another last act, Congress will vote to continue federal spending at fiscal 2006 levels through Feb. 15, a measure necessitated because lawmakers failed to pass any of the annual spending bills for the fiscal year 2007 beginning Oct. 1 except those dealing with defense and homeland security.