Add-ons turn tax cut bill into 'Christmas tree'

[December 11, 2010]  WASHINGTON (AP) -- In the spirit of the holiday season, President Barack Obama's tax-cut deal with Republicans is becoming a Christmas tree tinseled with gifts for lobbyists and lawmakers. But that hardly stopped the squabbling on Friday, with Bill Clinton even back at the White House pleading the president's case.

While Republicans sat back quietly, mostly pleased, Democrats and other liberals were going at each other ever so publicly. As Clinton lectured on Obama's behalf, Vermont independent Bernie Sanders castigated the agreement for the TV cameras in the mostly empty Senate chamber.

The tax deal, reached behind the scenes and still informal, now includes ethanol subsidies for rural folks, commuter tax breaks for their cousins in the cities and suburbs and 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, total cost by the latest congressional estimate: $857.8 billion.

On Friday, there were contrasting events for public consumption.

On Capitol Hill, Sanders spoke vigorously for 8 1/2 hours in a virtually empty chamber, urging defeat of a measure he said would give "tax breaks to millionaires and billionaires who don't need it." He finally ended his speech, conceding "It has been a long day."

At the White House, Obama turned over the briefing room microphone to former President Clinton who declared, "I don't believe there is a better deal out there." All sides, he said, "are going to have to eat some things they don't like."

The add-ons were being attached behind the scenes.

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's 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's already a law in place that requires ethanol be blended into gasoline.

"Historically the government has helped a product compete in one of three ways: Subsidize it, protect it from competition or require its use. We understand that ethanol may be the only product receiving all three forms of support from the U.S. government at this time," the senators wrote.

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 the Senate, their potential impact is less clear in the House, where Democrats have criticized the package as a tax giveaway to the rich.

Minnesota Rep. Collin Peterson, a conservative Democrat who steps downs as chairman of the House Agriculture Committee in January, 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, different parts of this will help different members," he said.

Still, Peterson said the credits for the corn-based fuel probably won't last forever. He said Rep. Jim Clyburn of South Carolina, the House's No. 3 Democrat, told the caucus it was important to include ethanol in the bill, and some members booed him. That wouldn't have happened a few years ago, Peterson said.

Rep. Earl Pomeroy, D-N.D., who lost re-election in November, sponsored the House version of legislation extending the ethanol tax breaks. But he says he still can't support the bill because of his opposition to provisions cutting estate taxes for the wealthiest Americans.

"There may be some that vote for the package that otherwise hate it because of the ethanol provision, but my sense is that ethanol alone isn't going to be something that puts us over the top," 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 his boss still hasn't been won over yet on the 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," said spokesman Derek Schlickeisen.

Rep. Jay Inslee, a Washington Democrat, 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. And it's nuts not to finance it by simply letting the upper-income tax brackets expire," he said. "I think there's a better deal out there potentially available and we ought to fight for it."

And there's the possibility the added goodies will have opposite the intended effect 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."

[Associated Press; By FREDERIC J. FROMMER and MARY CLARE JALONICK]

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