Senate tax package makes breakthrough

Senate leaders said Tuesday that they had broken a monthslong impasse over a tax break package that would bring billions of dollars in relief to individual and business taxpayers, developers of clean energy resources and people threatened by the alternative minimum tax.

Senate Finance Committee Chairman Max Baucus, Montana Democrat, and his Republican counterpart on the panel, Charles E. Grassley of Iowa, said the package could reach the Senate floor this week. The tax package is one of the last major issues that Congress must address in the last weeks before its scheduled adjournment for the year.

The agreement includes about $17 billion in clean energy tax incentives and provides for a fix, at an estimated cost of $64 billion over 10 years, to shield more than 20 million taxpayers in danger of getting hit by the alternative minimum tax.

The tax was enacted in 1969 to catch a small number of very rich tax dodgers, but was never adjusted for inflation and every year hits more people with upper-middle-level incomes unless Congress acts to protect them.

The Baucus-Grassley measure would also extend numerous targeted tax breaks that expired at the end of last year or are set to expire at the end of this year. Those include tax breaks for college tuition, state and local sales taxes and research and development for U.S. businesses.

“Protecting families from the alternative minimum tax and extending expiring tax cuts will put real money in the pockets of struggling families, and enable entrepreneurs to invest and innovate,” Mr. Baucus said.

Mr. Grassley noted that the agreement also included $7 billion in tax relief to help Iowa and other Midwestern states recover from floods and tornadoes that hit the area this summer.

The compromise had the blessing of Senate Majority Leader Harry Reid, Nevada Democrat, and Minority Leader Mitch McConnell, Kentucky Republican.

“It’s always a little bit dangerous to predict optimistic outcomes around here, but let’s do it anyway,” Mr. McConnell said. He said he and Mr. Reid have basically agreed to the package extending tax breaks that have expired or are about to expire.