House to Vote on $31 Billion in Tax Breaks

(AP)  Lawmakers want to extend $31 billion in popular tax breaks, including an income tax deduction for sales and property taxes. The problem: how to pay for it.

The House planned to vote Wednesday on a big tax increase for investment managers to help finance the renewal of 45 tax deductions and credits for businesses and individuals. The tax breaks are scheduled to expire at year's end.

The bill would tax fees collected by managers of investment funds as regular income - instead of capital gains - increasing their tax liability an estimated $24 billion over the next decade. The House has passed similar measures in recent years, but they have died in the Senate.

The House proposal would raise $7.7 billion from a crackdown on international tax cheats.

Tax breaks that would be extended include a sales tax deduction for people in states without income taxes, a property tax deduction for people who do not itemize and lucrative credits that help businesses finance research and development.

The tax breaks are supported by Democrats and Republicans alike and are routinely extended each year. The tax increases are not. The dispute, combined with the Senate's prolonged debate on health care, makes it unclear whether the tax package will be enacted this year.

Lawmakers could retroactively pass the package early next year, but that would make tax planning difficult for businesses and individuals. Some business leaders complain that the practice of passing one-year extensions each year - rather than enacting permanent tax law - already makes it tough to plan.

President Barack Obama supports the tax package, including the tax increase on investment managers and the crackdown on international tax havens.

Investment managers typically get a fee to manage funds, plus a share of the profits earned for investors above a certain level. Under current law, the profit-sharing fees, called carried interest, are taxed as capital gains, with a top rate of 15 percent.

The bill would tax the fees as regular income, with a top tax rate of 35 percent. That is scheduled to rise to 39.6 percent in 2011.

Rep. Richard Neal, D-Mass., said it is hard to justify a 15 percent tax rate for wealthy fund managers while other workers must pay higher tax rates.

Republicans argue the bill would also raise taxes on income from real estate partnerships, affecting investors across the country.

"We're in a recession and for the obvious reasons you don't raise taxes in a recession," said Rep. Dave Camp of Michigan, the top Republican on the tax-writing House Ways and Means Committee. "What we want to try to do is stimulate investment, not tax it."

The crackdown on tax havens would impose new reporting requirements on foreign financial institutions doing business in the United States and on American advisers who help U.S. residents make investments overseas.

[mypatch]

My father used to say that all politicians were all crooks and gave in one hand and took it all back and more in the next. He was so right. We are going to pay dearly for this recession. increase or no in taxes. They will find a way to get idt from us.

[curious51]

Wouldn't it be financially feasible simply to give each household $1,000,000 and be done with it????
What about the poor people, such as myself, that can't even run the furnace, because the electric bill is too high?! I have a slumlord, who refuses to 'fix' any part of the house, that I am 'renting to own', and the Weatherization Programs take forever!
This doesn't even touch on the amount of food stamps/SNAP I get, as I am disabled. SNAP is a Dept. of Agriculture and nutrition is the name of the game, but how is anyone suppose to prepare 'nutritious' meals on less than $200/month????

[hartmanlord]

Everyone knows it is tax the poor and give to the rich. After all who makes all the decisions and money? I wish they would raise taxes on the lower 90% of income earners to 100% and offset it with a 0% tax rate on the top 10%. This will begin the inevitable revolution that is coming. I'd rather die fighting than starving.

[luadda22]

Where did you come up with this dribble "everyone knows it is tax the poor and give to the rich"? The top 10% are paying in excess of 71% of the personal income taxes now while the bottom 50% pay less than 3%.

[dallaslou]

THE IRS IS WRONG FOR CHARGEING TAX PAYERS INTERESTS, ON WHAT TAXPAYERS OWE. WRONG AND UNFAIR. THE TAX BREAK IS ANOTHER WAY FOR THE IRS TO TAKE YOUR HARD EARNED MONEY. PLUS INTEREST.

[nowhiningallowed]

Sounds like the government will use this as an excuse to drop the deductions to get more taxpayer money to fund their out of control spending. This would also be a tax increase. I recall when credit card interest used to be tax deductible until the government did away with this in the 1980s to get funding through a veiled tax increase. The same thing happened with having to declare unemployment payments as income and get taxed on it. This also happened in the 1980s. The government loves yanking our chains giving it one day and then taking it away the next.