Insight: In "fiscal cliff" bill, White House was key to corporate tax breaks

Mon Jan 7, 2013 7:41pm EST
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By Patrick Temple-West, Marcus Stern and Susan Cornwell

WASHINGTON (Reuters) - As the Congress rushed last week to approve a "fiscal cliff" tax bill that raised income taxes on the wealthy, Washington lobbyists were fretting over a drama that was playing out within the negotiations: whether the bill would include about $64 billion in tax breaks for businesses.

The bill extended several tax breaks backed by both parties, including $14.3 billion in credits for research and development projects for thousands of U.S. businesses. But it also had other provisions - breaks for companies involved in wind energy, auto racing, rum, Hollywood films and much more.

In the end, the bill approved by Congress and signed into law by President Barack Obama included all of those things, thanks partly to the White House's interest in promoting wind and other alternative sources of energy, and in subsidizing research and development costs for companies.

It also became a lesson in how Washington's taste for dishing out favors to special interests is alive and well, despite bipartisan calls for the government to reduce the tax credits it gives businesses and individuals at a time when the nation's debt tops $16 trillion and is growing.

Some business lobbyists told Reuters they were surprised that the package of tax credits - which had been approved by the Democrat-led Senate Finance Committee in August - survived the negotiations over the tax bill. The main part of the bill extended Bush-era income tax cuts for individuals with incomes of less than $400,000 and couples who make less than $450,000.

The longer the negotiations dragged on, lobbyists for various causes had figured, the more likely the bill would focus solely on the core issues of the talks: raising income taxes on the wealthy, allowing a payroll tax cut for all Americans to expire, and extending unemployment insurance benefits.

The lobbyists' expectations also were lowered by the emergence of Senate Minority Leader Mitch McConnell, a Kentucky Republican, as a key negotiator in the talks.

McConnell has spoken on the Senate floor about the need to rethink Congress' approach to various tax breaks, saying that many had been "reflexively extended" for years "without any meaningful review or oversight."   Continued...

The U.S. Capitol Building stands in Washington December 17, 2012. REUTERS/Joshua Roberts