Tax-Break Add-Ons Threaten ‘New Markets’ Bill

The Washington Post September 28, 2000 | Eric Pianin A rare bipartisan agreement between President Clinton and House Speaker J. Dennis Hastert (R-Ill.) to spur economic development in poor communities is in danger of collapsing because of efforts in the Senate to load it up with billions of dollars in special-interest tax breaks.

What started out as a $17 billion “New Markets” bill passed by the House in July would now cost $38 billion because of tax breaks added by influential senators, many of which have nothing to do with the legislation’s purpose of helping residents of poor urban and rural communities.

Yesterday, Senate Finance Committee Chairman William V. Roth Jr. (R-Del.) postponed formal consideration of the bill for the third time in little more than a week because of difficulty coping with tens of billions of dollars more in requests from colleagues in both parties. Roth complained that the once modest tax package had become “a huge grab bag and warned that the whole enterprise might collapse unless senators abandoned their efforts to lard up the bill.

“Everyone knows if we have a Christmas tree tax bill, we’ll never get it done,” said Sen. Orrin G. Hatch (R-Utah), a Finance Committee member.

The bill, first advanced by Clinton and Hastert during an unusual joint appearance in Chicago last year, represents the most significant congressional initiative to address poverty in years. It includes provisions to spur capital investment in low-income urban and rural areas create 10 venture capital firms to invest in small businesses in poor neighborhoods and expand the number of “empowerment zones” where tax breaks and regulatory relief apply. in our site christmas tree tax

But since the bill reached the Senate this summer, it has been amended to include a vast array of unrelated measures, including a big Amtrak subsidy, incentives for Internet cable companies and tax breaks for farmers and certain domestic oil and gas producers. The controversy over the bill is the latest installment in a year-end feeding frenzy in which Congress is moving to approve the biggest spending increases since the Republicans took control in 1995.

While celebrating news of a record $230 billion surplus for the fiscal year about to end, President Clinton expressed concern about the “size and last-minute nature of this year’s congressional spending spree.” “They seem to be loading up the spending bills with special projects for special interests,” Clinton said, “but can’t seem to find the time to raise the minimum wage, or pass a patients’ bill of rights, or drug benefits for our seniors … or tax cuts for long- term care, child care or college education.” The White House and Hastert’s office voiced concern about the fate of their community development legislation. “We’re confident we can get it done, but just don’t ask me how,” said John Feehery, the speaker’s press secretary. “That’s the problem when people see this bill as the last train leaving the station. They want to jump aboard.” With most of the major GOP tax legislation dead for the year, the community development measure a major target special-interest pleading. Roth initially added about $11.5 billion in costs to the House-passed bill, including a measure authorizing Amtrak to sell $10 billion worth of bonds to develop high-speed rail service. website christmas tree tax

Committee members then bombarded Roth with proposals for 72 amendments, many of them costly tax items. While balking at first, the chairman eventually agreed to accept 36 of the amendments from GOP and Democratic members, adding $9.5 billion more to the bill’s total cost.

For instance, Sen. Charles Grassley (R-Iowa) won inclusion of agriculture-related tax measures, including expanding tax-deductible savings accounts for farmers. Hatch and Sen. Max Baucus (D-Mont.) won inclusion of a package of energy initiatives, including a tax credit for small domestic oil and gas producers. Sens. Daniel Patrick Moynihan (D-N.Y.) and Jay Rockefeller (D-W.Va.), among others, pressed for a tax credit for companies that invest in wiring rural and disadvantaged communities for the Internet, in a move to bridge the digital divide.

There was also a tax credit to encourage land conservation and a plan favored by Democratic vice presidential candidate Joseph I. Lieberman (D-Conn.) and Sen. Rick Santorum (R-Pa.) to generate pools of capital to be to lowincome people.

Roth urged other members to set aside the rest of their amendments during a closed-door session yesterday and thought he had a deal. But when Sen. Phil Gramm (R-Tex.), a sharp critic of the Amtrak subsidy, refused to go along, the deal fell apart. Gramm intends to offer amendments to strike the Amtrak subsidy and to require that existing enterprise zones be fully funded before creat.

“Look, I want to be cooperative … but I’ve got responsibilities as a senator that I’m just not going to up,” Gramm said.

An aide to Roth said that once Gramm and a couple of other members began to balk, “that poisoned the well” and all the other senators insisted on offering amendments of their own.

Sen. Frank H. Murkowski (R-Alaska), for one, hasn’t given up trying to Roth to take his amendment dealing with the treatment of deregulated utilities and the decommissioning of nuclear power facilities–a move that would reduce tax rec by nearly $10 billion over the coming decade.

Sen. Kent Conrad (D-N.D.) is pressing for a change that would speed up the depreciation of improvements on leased property for tax purposes would reduce revenues by $5 billion to $6 billion. And Sen. John B. Breaux (D-La.) wants to use the bill to slap a tariff on imported molasses to protect Louisiana sugar growers.

Roth will try again today to move his bill out of committee, but has threatened to pull it unless other senators back off. “Every senator legitimately wants to push his own interest, but not everyone can have his own way,” said Baucus, a senior Democrat on the committee. “Roth is trying to find consensus, but we’re not there yet.” Eric Pianin