Republicans Block Action on Senate Tax Bill

By MARTIN VAUGHANJuly 31, 2008;

WASHINGTON -- Republicans again turned back a Democratic attempt to bring an energy- and business-tax bill to the Senate floor, likely delaying action on the package until September at the earliest.

The bill would extend tax incentives for wind, solar and other forms of renewable energy, and would renew a host of expired tax cuts, such as the research tax credit and the state-sales-tax deduction. It would also protect most taxpayers from the alternative minimum tax in 2008.
The move failed on a 51-43 procedural vote, dashing Democrats' hopes that their recent additions to the bill would draw more Republican support.
The White House said senior advisers will recommend a veto should the Senate tax bill reach the president's desk in its current form. The White House had earlier threatened a veto of similar legislation passed by the House.
Senate Majority Leader Harry Reid (D., Nev.) said Tuesday that if Republicans continued to block the tax bill, he wouldn't allow amendments on a separate bill to curb oil-market speculation.
In a bid to draw more Republican votes for the tax bill, Senate Finance Committee Chairman Max Baucus (D., Mont.) last week added disaster relief for Midwestern states and a requirement that health plans cover mental illnesses on par with physical diseases.
Sen. Charles Grassley (R., Iowa) said following the vote that the two sides remain divided over the extent to which tax cuts in the bill should be offset to keep the deficit down. Sen. Grassley voted against the Democratic efforts to limit debate on the bill.
Republicans have argued that permanent tax changes shouldn't be used to offset the temporary tax cuts in the bill. They have proposed that Democrats use the offsets in the bill -- a loophole-closing provision that bars hedge-fund managers from shielding offshore income from taxes and a delay in a scheduled tax cut for multinational firms -- to make one or more of the tax cuts permanent or extend them. For example, the bill could extend the research tax credit for five to seven years instead of just one, Sen. Grassley said. But Democrats aren't biting. "They're holding their ground," he said.
In a nod to Republican concerns, the latest version of the bill calls for the offsets to expire in 2018. But a White House statement condemned that as a "gimmick."
The White House also criticized a provision in the Senate bill that would transfer $8 billion from the general fund to the Highway Trust Fund so projects don't go unfunded because the government is collecting less revenue than projected from gasoline taxes. The provision creates a "dangerous precedent that shifts costs from users to taxpayers at large," the White House said.
The House approved the Highway Trust Fund transfer last week on a 387-37 vote.
Write to Martin Vaughan at martin.vaughan@dowjones.com