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What deficit? House GOP leads passage of $650-billion tax-break package

What deficit? House GOP leads passage of $650-billion tax-break package
House Speaker Paul D. Ryan (R-Wis.) on Capitol Hill. (J. Scott Applewhite / Associated Press)

By approving a massive package of tax breaks Thursday, House Republicans -- who have made deficit-slashing the holy grail of their majority -- just piled on nearly $650 billion in red ink.

The 318-109 vote, part of a sweeping budget deal expected to clear Congress by week's end, was supported by business and anti-poverty advocates as a down payment on a broader tax overhaul and a way to make permanent dozens of specialty tax breaks that have been renewed year to year.

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But passage served as a reminder of the dominance in the GOP of so-called supply-siders over deficit hawks. Most Republicans, including Speaker Paul D. Ryan (R-Wis.), believe tax cuts will more than pay for themselves by stimulating economic growth. Only a handful of Republicans joined most Democrats in opposing the measure.

"Where did all the deficit hawks go?" asked Minority Leader Nancy Pelosi, the Democrat from San Francisco, who opposed the bill. "Probably part of the endangered species, I don't know."

The bill now moves to the Senate, where it is expected to be combined with a $1.1-trillion "omnibus" spending measure to avert a federal shutdown and keep the government funded through Sept. 30. Final votes are set for Friday, and President Obama is expected to sign the combined package into law.

As a whole the package represents one of the biggest domestic policy initiatives in years, and exposes the trade-offs that are commonly made in Congress to reach consensus.

The tax breaks were needed to make the broader package more palatable. Many conservative Republicans oppose the spending bill because it reverses some of the steep sequester cuts Congress put in place just a few years ago, but they embraced the tax breaks.

"This is a good bill, this is an amazing bill," said Rep. Pat Tiberi (R-Ohio), during the floor debate. "Go talk to your small businesses .... This is going to provide amazing certainty."

But, noting that the measure's overall price tag soars to $800 billion after including interest payments over the next decade, Rep. Steny H. Hoyer of Maryland, the Democratic whip, countered: "The certainty of this bill is that we will explode deficits."

Democrats support several of the tax breaks, including the $1,000 child tax credit and others to encourage business investment and fight poverty. In the omnibus bill, Democrats also fought to include a temporary halt to new Obamacare taxes, including one on medical device manufacturers and another on so-called Cadillac health insurance policies. Labor unions opposed the tax on high-priced plans, fearing it would affect its members the most.

But budget hawks in both parties criticized what they called a violation of the GOP's usual policy of requiring any new spending to be paid for with cuts to other programs. Instead the party approved the tax breaks without offsetting the reductions elsewhere in the budget.

Outside budget gurus warned that even as the nation's annual deficits have tumbled from historic highs during the Great Recession, the extra outlays will only deepen the federal government's broader fiscal challenges.

A broader effort at tax reform, which had been one of Ryan's top priorities before becoming speaker, has eluded Congress.

"Congress' capacity to govern remains disturbingly dependent on adopting measures the country cannot afford," Jason Grumet, president of the Bipartisan Policy Center, said in a statement. "This agreement would increase the deficit by roughly $800 billion, which is deeply troubling and weakens our nation future."

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The tax package extends or makes permanent 233 pages' worth of tax breaks, both large and small.

Some have bipartisan support, including one that allows small businesses to write off as much as $500,000 worth of expenses and another that allows corporations to more quickly take deductions on their investments.

Few lawmakers oppose deductions for teachers who pay for classroom expenses out-of-pocket or for stores that donate extra food to charity.

Others, including a five-year extension of production and investment tax credits for wind and solar energy development, are more favored by Democrats, and Pelosi negotiated for anti-poverty measures important to the White House, including the tax breaks for children and low-income workers that help 18 million Americans.

But the package also includes a hodgepodge of specialty tax breaks for thoroughbred racehorse owners, NASCAR racetrack developers and makers of Puerto Rican rum. A break for film industry production will continue, and a new write-off was added for citrus and nut growers.

The nonpartisan Committee for a Responsible Federal Budget called the deal "fiscally irresponsible."

As the tax package was being approved Thursday, the broader omnibus spending bill ran into some last-minute trouble before Friday's vote.

Democrats remain upset that it lifts a decades-long ban on exporting U.S. oil while failing to include one of their priorities to allow Puerto Rico to restructure its debt. Republicans remain concerned that it chisels away at past sequester cuts.

Without passage, temporary funding for the government would run out Tuesday.

For the latest from Congress and the 2016 campaign follow @LisaMascaro

For more, go to latimes.com/politics

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