- The Washington Times - Monday, November 21, 2005

The tax-cut bill approved by the Senate and the bill that House leaders pledge to approve after Thanksgiving each extend different tax cuts, and will have to be melded together in what could be a challenging road to final approval.

The House on Friday postponed a vote on its $56.1 billion tax-cut package until after the Thanksgiving holiday, while the Senate moved late last week, 63-44, to approve its $59.6 billion tax-cut bill.

While the two bills extend many of the same soon-expiring tax cuts, the main provision in each bill is different.

The House would spend about $20.5 billion to extend for two years a reduced tax rate for capital gains and dividend income, set to expire in 2008. The Senate was forced to drop this provision, however, because a key Finance Committee Republican, Sen. Olympia J. Snowe of Maine, balked at it. She expressed concern — shared by liberal Republicans in the House — about renewing a tax cut that doesn’t expire for two years, especially at a time when government is squeezed by costs for emergency hurricane relief.

Meanwhile, the Senate bill contains a provision, missing from the House bill, that would dedicate about $28.8 billion to prevent millions from having to pay the Alternative Minimum Tax (AMT). Senate aides said it will probably cost a few billion dollars more, after tax writers calculate a few changes made on the Senate floor last week.

Senate and House leaders are gearing up to fight to defend each version’s key provisions.

House Ways and Means Committee Chairman Bill Thomas, California Republican, insists on the capital gains and dividends provision, since he says it helps more people than the AMT provision, which “is for a smaller, richer group of people.”

But Democrats and some Republicans oppose extending the capital-gains cut, which they insist primarily benefits the rich.

Rep. Jim McCrery, Louisiana Republican and a member of Mr. Thomas’ tax-writing panel, said that since the AMT is the largest chunk of the Senate bill and the investment-tax provision is the largest chunk of the House bill, it will be difficult to squeeze them both into a final bill. Mr. Thomas said he doesn’t know whether both can be included.

Senate Majority Leader Bill Frist, Tennessee Republican, thinks there are enough Senate votes to pass a bill containing a capital gains and dividends provision, so his strategy is to insist on the House position in the final bill. “I will not bring a conference report to the Senate floor that does not include this extension,” he said last week.

In addition to these struggles, only the Senate bill contains a provision creating tax incentives to encourage charitable giving, and a section of revenue-raisers, including one that amounts to a tax increase for some oil companies. The Senate modified that provision to clarify it would only affect large oil companies, but the White House still wants it stripped from the final bill and has threatened a veto if it isn’t.

The Senate bill also dedicates upwards of $7 billion to tax relief for individuals and businesses hurt by recent hurricanes. This may not be a big fight, however, since Mr. Thomas indicated he’s open to including hurricane relief in the final bill. “It may be the fastest way to … get it to the president,” he said last week.

The two bills would similarly extend a series of tax breaks set to expire this year. But there are a few differences here as well. For instance, the Senate would extend a college tuition tax deduction through 2009, at a cost of $7.4 billion, while the House opts to spend $1.7 billion to extend it for one year.

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