Big Blow For House GOP

Surprising Defeat For Health, Education Spending Bill

(CBS/AP) 
Lawmakers were alarmed this fall when profit reports showed five major companies and their global parent corporations earned more than $32.8 billion in the July to September quarter.

Consumers saw gasoline prices soar beyond $3 a gallon in the aftermath of supply disruptions caused by hurricanes, and the politicians called oil executives to Capitol Hill to explain their huge profits.

The Senate defeated a proposal that would have eliminated a tax incentive for major oil and gas companies that allows them a credit for exploration and development cost. An amendment to ban price gouging during national energy emergencies declared by the president won the support of 57 senators but fell short of 60 votes needed to overcome a procedural hurdle.

The overall bill would cut taxes $60 billion over five years, preserving many tax breaks scheduled to expire unless lawmakers keep them intact. Unlike a version passed by a House committee, the bill would not extend reduced tax rates for capital gains and dividends. Senate GOP leaders vowed to make sure the 15 percent tax rate for investment income will be in the final version of the bill.

The bill would hold back the alternative minimum tax, which will reach into the pockets of millions more taxpayers next year unless Congress prevents inflation from pushing the tax into the middle class. Lawmakers instituted the tax to prevent the wealthy from avoiding all taxation.

The bill also would offer $7 billion in assistance to businesses and individuals hit by Hurricane Katrina and other storms, filling in details of President Bush's proposed Gulf Opportunity Zone.

Other provisions would extend a deduction for state and local sales taxes, investment incentives for small businesses, a business research and development credit and a tuition deduction. Taxpayers would get new incentives to make charitable contributions, at the same time as tax-writers put new curbs on breaks for charity that they've deemed abusive.