House Approves Tax Bill, but It Stalls in Senate

The House narrowly approved a bill providing tax relief and urban aid Tuesday, but the legislation immediately ran into a filibuster in the Senate--and the prospect of a veto by President Bush.

The House approved the controversial package early Tuesday after an all-night session and then adjourned for the year. The legislation contains $28 billion in assorted tax breaks. It squeaked through on a vote of 208 to 202 after members of both parties complained that it had become bloated with tax increases and special-interest provisions and could backfire with voters.

Its future in the Senate was cast in doubt after the bill became the target of a 15-hour filibuster mounted by Sen. Alfonse M. D’Amato (R-N.Y.), who was protesting the omission of a provision designed to protect a typewriter plant in New York that is about to close.

Although D’Amato later relented and agreed to let the Senate vote Thursday on whether to close off debate and act on the measure, the delay heightens prospects that the Senate may not complete work on the bill before it, too, adjourns. The Senate still must deal with tax, energy and water resources legislation but hopes to adjourn by the end of the week.

GOP congressional leaders hinted strongly Tuesday that President Bush, who has threatened to veto similar tax bills before, most likely will reject this one as well, even though it contains several elements of his own economic program.

Senate Minority Leader Bob Dole (R-Kan.) told reporters Tuesday that the tax bill is “destined for burial” in the 102nd Congress. “I don’t think the President will sign it,” he said. House Minority Leader Robert H. Michel (R-Ill.) made a similar forecast.

A veto by Bush would kill the bill. With the House already adjourned and the Senate set to leave soon, Congress would not be around to override Bush’s veto--even if it could muster the necessary two-thirds majorities, which seems doubtful.

House leaders worded their adjournment resolution in such a way that they can call members back on Thursday if something unexpected arises from the Senate action. Even so, the adjournment appeared to effectively mark the end of the 102nd Congress, one of the most contentious and scandal-filled sessions in recent memory.

As is traditional when Congress adjourns, House Speaker Thomas S. Foley (D-Wash.) and Senate Majority Leader George J. Mitchell (D-Me.) telephoned President Bush to tell him the House had completed its business for the year. Prospects for another stalled Senate bill, a major revision of the nation’s energy strategy, began to improve Tuesday when Nevada’s two senators indicated to congressional leaders that they would ask for only two hours of debate time Thursday after the Senate votes to end its filibuster. The concession all but ensures that the Senate will vote on the legislation.

The Nevadans--Democrats Richard H. Bryan and Harry Reid--have been fighting the measure because of a provision that they fear would make it easier for the Department of Energy to locate a high-level nuclear waste site at Yucca Mountain, 100 miles northwest of Las Vegas.

But after two days of intensive lobbying, the Nevadans perceived that Senate supporters of the bill still have enough votes to overcome their delaying tactics.

The tax bill contains a bevy of tax breaks, such as expanded benefits for holders of individual retirement accounts, tax relief for investors and corporations and repeal of the luxury tax enacted in 1990 on expensive boats, furs and jewelry.

The urban-aid provisions of the bill would create 50 new enterprise zones to help create jobs in poor neighborhoods and provide tax incentives for businesses that expand jobs in those neighborhoods.

Although half of the zones would be reserved for rural areas, congressional strategists said that it is almost guaranteed that Los Angeles would be a major beneficiary of the bill. The measure was crafted after the Los Angeles riots as part of an urban aid package, some elements of which already have been approved.

Despite Dole’s predictions that Bush will veto the measure, the bill presents something of a political quandary for the President. Bush has drawn sharp criticism for agreeing to a tax increase in 1990, two years after promising in his election campaign that he would never agree to raise taxes. Last summer, he renewed his “no new taxes” pledge, saying that he would not raise taxes “ever, ever.”

The pending bill could prove troublesome for Bush because congressional budget procedures require that all tax-cut legislation contain provisions to offset the cost of any reductions, either through spending cuts or tax increases.

Bush already has signaled the difficulty that such a decision would mean for him, telling interviewers on ABC-TV’s “Good Morning America” on Monday that he was “not sure” what he will do about the bill.

The major tax benefits in the measure would ease curbs on IRAs, both by restoring deductions for high-income taxpayers and by removing restrictions on early withdrawal for such expenses as college or medical costs.

The measure also would make permanent a series of existing tax breaks that otherwise would expire, including those for the creation of jobs, investment in low-income housing and mortgage and industrial revenue bonds.

Repeal of the luxury taxes is in the legislation because congressional Democrats, who had insisted on the new taxes two years ago, pushed to remove them after manufacturers complained that they were being hurt.

The provisions Bush sought, in addition to the new enterprise zones and tax incentives to spur real estate investment, include a reduction in the corporate minimum tax and permission for pension plans to invest in real estate.

To compensate for revenue losses tied to these measures, however, the bill has several tax increases, many of which Bush has backed.

These include increasing the taxable value of securities firms’ inventories, boosting quarterly income tax payments, lengthening the depreciation period for commercial real estate to 40 years and requiring operators of recreational boats to pay a diesel fuel tax.

Democrats also added several tax increases of their own: They repealed the deduction for dues businesses pay to private clubs and limited the deductibility of moving expenses.

Times staff writer William J. Eaton contributed to this story.

The Final Tax Bill

Here are the key provisions of the tax relief and urban aid legislation passed by the House Tuesday:

TAX REDUCTIONS

50 new “enterprise zones” to provide tax incentives for businesses that expand employment in poor neighborhoods.

Penalty-free withdrawals from individual retirement accounts for first home purchases, college tuition, medical expenses, and living expenses incurred by long-term unemployed.

Special new IRAs that allow tax-free withdrawals if the funds have been on deposit for at least five years.

Restoration of fully deductible IRA contributions for individual taxpayers with adjusted gross incomes of less than $75,000 and couples with less than $100,000.

Repeal of the luxury tax on purchases of airplanes, boats, jewelry and furs.

Expanded deduction for “passive” losses incurred on rental property by developers.

New alternative minimum tax rules to simplify and reduce the burden on businesses.

One-year extension of tax credit for business spending on research and experimentation.

New rules making it easier for pension plans to invest in real estate ventures.

Permanent extension of tax breaks for job creation, low-income housing, and mortgage and industrial revenue bonds.

*

TAX INCREASES

New rules increasing the taxable value of securities firms’ inventories.

Bigger payments from individuals and businesses required to pay quarterly income taxes.

40-year depreciation for commercial real estate.

Imposition of diesel fuel tax on operators of recreational boats.

Increased withholding rate for bonuses.

Reduced deductibility of moving expenses.

Elimination of business deduction for dues paid to private clubs.

Source: Senate Finance Committee