The Senate passed a giant tax package Tuesday that saves more than 20 million taxpayers from the bite of the alternative minimum tax.
At a cost of more than $100billion, the bill also nudges the nation toward greater use of alternative energy resources, renews popular tax breaks for businesses and individuals, and extends relief to disaster victims.
“The economy is struggling,” Senate Finance Committee Chairman Max Baucus, D-Mont., said. “At times like these, Americans need tax cuts that they've come to count on, that can help them get by.”
But with time running out in this session of Congress, the House is choosing to diverge from the Senate by taking up a bill that fully pays for the business and individual tax breaks by eliminating some tax breaks for hedge fund managers and for corporations doing business overseas.
The Senate only partially offsets the costs of its business and individual tax breaks, and Senate leaders warned that any changes could doom the bill. The House could take up its version as early as today.
The bill passed the Senate 93-2. Sens. Richard Burr, R-N.C., Elizabeth Dole, R-N.C., and Lindsey Graham, R-S.C., joined the majority. Sen. Jim DeMint, R-S.C., did not vote.
The alternative minimum tax was enacted in 1969 to catch a few very rich tax dodgers. But it was never adjusted for inflation, and Congress must act every year to ensure it doesn't catch more people.
Without action, those affected could grow from about 4million to 25 million, at an average tax increase of $2,000. The fix would cost $64 billion spread out over 10 years.
Last year Congress, after a prolonged fight over whether to pay for the fix with new tax revenues in other areas, waited until late December to pass legislation, causing delays in some IRS refund payments. The AMT patch this year, as last year, is not paid for.
The first segment of the three-part tax bill was a $17 billion measure to spur investment and create jobs in the renewable energy industry. The energy legislation extends for eight years, through 2016, investment tax credits for the solar power industry and for homeowners who install solar and wind equipment.
Taxpayers can claim a credit of up to $7,500 for purchasing plug-in electric cars, and production credits are extended to wind, biomass and marine — waves and tide — facilities.
A study commissioned by the Solar Energy Industries Association found that the eight-year extension would more than triple investment during that period, to $325 billion, and almost triple employment in the industry, to 440,000 in 2016.
While enjoying wide bipartisan support, the tax bill has struggled to get through the Senate this year. Senate Democrats have been caught between Republicans and the president, who oppose any new taxes to offset the costs of the tax relief, and House Democrats demanding that the bill be paid for to avoid adding to the federal deficit.
The Senate bill offsets the energy measures by limiting tax breaks for the oil and gas industry and pays for about $25billion of the $68 billion in individual and business tax breaks.
The legislation additionally includes more than $8 billion in tax relief for Midwestern states hit by natural disasters this summer and for the more recent victims of hurricanes in Texas and Louisiana.