Tax breaks, Medicare plan pushed as Congress ends

WASHINGTON - Lawmakers on Thursday pieced together legislation extending popular tax breaks and saving doctors from a cut in Medicare payments as Republicans prepared to cede control of Congress to the Democrats.

House GOP leaders exiting power delayed a vote after it became clear it couldn't occur until well after midnight. The House vote was rescheduled for today. In the Senate, leaders were experiencing lingering unhappiness with the bill from several GOP senators, especially over extending trade benefits for textile exports from Haiti.

The legislation also contained several trade-related measures, including extending normal trade status to Vietnam.

Action on the tax and trade legislation and a subsequent vote on a bill to keep the government running through Feb. 15 were the chief obstacles to concluding the turbulent 109th congressional session.

It was hardly the first time the GOP-controlled Congress had employed a secretive, closed-door process to assemble important legislation. Still, Democrats supported the contents of the bill - if not the way it was put together.

"This is not a perfect bill, but it renews tax cuts Americans need right now, like the college tuition deduction, and makes sure that Medicare and Medicaid patients will have access to care next year," said Sen. Max Baucus of Montana, top Democrat on the Finance Committee.

But the measure - containing much to please lawmakers and their constituents - also generated opposition. Sen. Judd Gregg, R-N.H., for example, was unhappy about its cost and a multibillion-dollar move to expand health care for retired coal miners.

50-50, Reid says

Under Senate rules, a single senator can force considerable delay once a bill comes over from the House.

"It's no better than 50-50 right now," Senate Minority Leader Harry Reid, D-Nev., said Thursday afternoon. Prospects among Senate Democrats improved; but the House, for reasons not altogether clear, went in to a recess that lasted more than five hours.

Lawmakers from states such as Georgia, Illinois and Massachusetts were unhappy that House Republicans cut out a plan to ease looming budget shortfalls in a federal-state program providing health insurance coverage to low-income children. And New Yorkers seethed after Republicans dropped tax incentives for a rail link from Manhattan to Kennedy Airport.

At the same time, lawmakers were generous with tax-free health-savings accounts used chiefly by higher-income taxpayers, increasing contribution limits at a cost of $1 billion over the next decade.

Democrats mostly went along with extending expired tax breaks. They include a research and development tax credit, worth $16.5 billion, and a sales tax deduction for people in states without income taxes, at a cost of $5.5 billion. All told, the tax cuts would cost $38 billion over five years.

Also driving the huge bill forward was an effort to forestall a 5 percent cut in Medicare payments to doctors and a plan to open more than 8 million acres along the Gulf of Mexico to oil and gas drilling.

Agency budgets

But Democrats criticized Republicans for giving up on legislation funding more than $460 billion in unfinished agency budgets, requiring passage of a third stopgap spending bill to keep the government running.

The House and Senate planned votes today to avoid a government shutdown.

Government agencies, except for the Defense and Homeland Security departments, have been on autopilot at or below 2006 budget levels since the new spending year began Oct. 1.

Washington measure on the line

Washington state lawmakers were optimistic as congressional negotiators reached agreement on a tax and trade package that includes a provision allowing state residents to deduct state sales taxes from their federal income tax returns.

A House vote on the complex bill had been anticipated late Thursday but was rescheduled for today, with a vote in the Senate after that.

Washington is one of eight states without an income tax that could lose the ability to deduct state sales tax from their federal returns if the law is not renewed.

The Associated Press