Senate vote torpedoes Dems' fiscal pledge
Eleven months after adopting stringent new rules aimed at reining in the federal deficit, the Senate late Thursday shrugged off its pledge...
The Washington Post
WASHINGTON — Eleven months after adopting stringent new rules aimed at reining in the federal deficit, the Senate late Thursday shrugged off its pledge of fiscal rectitude and overwhelmingly approved a measure to spare millions of families from the growing reach of the alternative minimum tax (AMT) without providing an offsetting tax increase.
The Senate's 88-5 vote blew a $50 billion hole in the Democrats' promise not to pass any spending or tax measure that would add to the deficit. The outcome brought a furious response from conservative "Blue Dog" Democrats in the House, who assailed the Senate and vowed to block passage of any tax measure that would add a cent to the federal debt.
"We run for re-election every two years. They run every six years," fumed Rep. Mike Ross, D-Ark. "Don't try to tell me the Senate can't take a tough vote."
Despite the heavy toll the AMT exacts on some middle-class taxpayers, Congress has been loathe to repeal it outright, leaving a trillion-dollar hole in the federal budget over 10 years. Instead, successive Congresses have opted for one-year "patches" that hide the long-term cost.
The Senate-passed bill would spare the middle-class households touched by the AMT an average $2,000-a-family increase on 2007 income taxes and would ensure that refunds of up to $75 billion would be distributed without delay.
As the senators wrangled over the AMT on Thursday, they dropped a provision that would allow residents of Washington and seven other states to continue deducting their sales taxes from their federal income tax.
Without that provision, residents will be able to deduct sales taxes when they file their 2007 federal income taxes in April. But then the tax deduction would expire.
Sens. Patty Murray and Maria Cantwell, both Democrats, and Rep. Brian Baird, D-Vancouver, had been pushing bills to make the sales-tax deduction permanent, or at least extend it two more years.
Lawmakers from Washington and the seven other states with sales-tax deductions will try to pass a quick fix later this month or in January, a spokeswoman for Cantwell said.
Murray and Cantwell voted for the AMT measure. All five presidential candidates in the Senate — Joseph Biden, D-Del.; Hillary Rodham Clinton, D-N.Y.; Chris Dodd, D-Conn.; John McCain, R-Ariz.; and Barack Obama, D-Ill. — missed the vote.
The AMT was designed in the 1960s to prevent the very rich from using deductions, credits and other shelters to avoid paying taxes, but its income thresholds did not rise with inflation.
Taxpayers are not hit by the AMT based on income alone. The number and type of deductions and credits they take also help determine whether they will be forced into the alternative taxation system. Because of rising incomes, the tax's bite is expected to expand to more than 30 million households in 2010. The AMT affected 3.8 million mostly well-off households last year.
Senate Democratic leaders insisted they had done all they could to preserve their much-ballyhooed pay-as-you-go — or "pay-go" — rule, which said any new entitlement spending or tax cuts had to be offset by tax increases or spending cuts.
Once a centerpiece of Democratic claims to the mantle of fiscal discipline, pay-go ultimately was steamrollered by the AMT, which could hit 23 million families this year if Congress fails to act.
"We want everyone to know we have tried every alternative possible," Senate Majority Leader Harry Reid, D-Nev., said after Republican lawmakers used Senate rules to block any consideration of the House-passed AMT bill, paid for largely by tax increases on Wall Street titans.
For some Democrats, especially the Blue Dogs, the blow to pay-go was particularly bitter. For years, Democrats tried and failed to force GOP leaders in Congress to adopt pay-as-you-go rules, in large part to limit wave after wave of tax cuts they said were piling government debt onto future generations.
"The politics have been very bad," said Rep. John Tanner, D-Tenn. "But that's the problem with politics, politicians giving the voters everything they want without paying for it. That's the easy way out."
With pay-go breached, Republicans were almost gleeful. "They had painted themselves into a corner," said Sen. John Thune, R-S.D. "That's a huge concession on their part, completely repudiating one of their core principles."
Both sides predicted the breach could create a flood, as lawmakers argue their pet legislation is just as deserving of a waiver from the strictures of pay-go.
"If we waive pay-go on this, it will open the door for more financial — bordering on criminal — irresponsibility," Tanner predicted.
Seattle Times reporter Alicia Mundy contributed to this report, which includes material from the Los Angeles Times.
House OKs energy bill, fuel standards
The House on Thursday brushed aside a White House veto threat and approved an energy bill that would raise automobile fuel-efficiency standards for the first time in 32 years and require increased use of renewable energy to generate electricity.
The 235-181 vote sent the measure to the Senate, where Republicans hope to strip it of tax increases on the oil industry and the renewable-source requirement before a final version goes to President Bush. The White House objects to the bill on multiple fronts, including the prospect of tax boosts on oil companies, saying that Bush would veto it.
But with energy prices soaring, lawmakers from both parties expressed strong support for fuel-efficiency standards, which Congress has not changed since the mid-1970s.
In the Washington delegation, Republican Dave Reichert and all Democrats voted for the bill, except for Brian Baird, who did not vote. Republicans Doc Hastings and Cathy McMorris Rodgers voted against it.
Under the measure, manufacturers' vehicle fleets would have to average 35 miles per gallon by 2020, a 40 percent increase over the current requirement. By that same deadline, 15 percent of the electricity generated by the nation's utilities would have to come from renewable-energy sources, such as solar and wind power, as well as biomass.
The bill also would provide tax incentives to bring about a sevenfold increase in the use of ethanol as a motor fuel by 2022 and would include appliance and light-bulb standards that would effectively phase out, by the middle of the next decade, the incandescent light bulb.
To finance tax incentives for various aspects of the legislation, the bill includes $21 billion in revenue increases, including a rollback of $13.5 billion in tax breaks for the five largest oil companies.
— The Washington Post and The Associated Press
Copyright © 2007 The Seattle Times Company
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