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U.S. Lawmakers Seek $700 billion Tax-Cut Deal | Financial Times (Paywall)

Corporate America is urging lawmakers to seal a potential deal to save $700bn in taxes for businesses and individuals in a rush of end-of-year dealmaking on Capitol Hill.

US businesses want Congress to make permanent dozens of temporary tax breaks that have been renewed multiple times but expired at the end of 2014, creating unwanted costs and uncertainty.
In negotiations over recent days Democrats have insisted the corporate breaks be matched by tax benefits for the working poor and the middle class, a point on which both parties broadly agree, aides said.
But the talks were hanging in the balance on Tuesday as the deal’s price tag caused some unease and disagreements blew up linked to President Barack Obama’s healthcare reforms, still a toxic subject for Republicans.
A deal over the 50-plus measures known as “tax extenders” would clear the way for Congress to focus on broader tax reform, which businesses are eager to see and is most likely in 2017 after the next presidential election.
Negotiations on the extenders are separate from talks over a spending bill to dole out budget funds, which has a deadline of this Friday.
Caroline Harris, executive director of tax policy at the US Chamber of Commerce, the biggest business lobby, said the tax measures would bring “predictability and certainty” to the law.
“Congress must act now to extend these vital provisions, which are essential to ensuring companies can compete globally [and] have appropriate cost recovery times.”
Executives and their lobbyists have fanned out across Capitol Hill in recent weeks to make their case to lawmakers on breaks such as a tax credit for research and development, which could cut $110bn off tax bills, according to the Committee for a Responsible Federal Budget.
Another popular provision with a big price tag would let small business owners claim a tax deduction for the expense of office equipment, machinery and other items as soon as they are purchased, delivering a tax cut of around $70bn.
Other breaks affect the renewable energy industry, including a production tax credit used by wind power developers and a solar investment tax credit.
Democrats and the Obama administration broadly support the business measures. But they want to use the tax package to renew family-focused breaks such as a child tax credit for low-income parents and an “earned income tax credit” to let poor workers recover some income.
Republicans have sought to exclude undocumented immigrants from receiving those benefits.
Ron Wyden, the top Democrat on tax policy in the Senate, said: “Right now there are many moving pieces in play. At the end of the day both sides want a multiyear bill that provides economic relief to families and greater predictability for businesses.”
A spokeswoman for Orrin Hatch, who leads tax writing for Senate Republicans, said: “Negotiations continue and no final decisions have been made on how Congress will move forward.”
While businesses would like their tax breaks to become permanent, House Republicans introduced back-up legislation on Tuesday night that would cover two years, bringing the extenders into force for 2016 and retroactively for 2015.
The healthcare provisions that caused the latest hiccup in talks include a medical device tax that Republicans want to eliminate and a “Cadillac tax” on the most expensive health insurance policies that some Democrats — but not the White House — want to reform.
Congress has not found a way to pay for the potential tax cuts so they would increase the budget deficit, a cause of concern for some lawmakers.
Marc Goldwein, vice-president of the Committee for a Responsible Federal Budget, a bipartisan group, estimated that a deal could deliver a tax cut worth $500bn-$800bn, with a likely reduction of $700bn based on current negotiations.
“A lot of members [of Congress] are willing to add $700bn [to the deficit] for the right deal, but if it’s the wrong deal the size of that number is going to come into play,” he said.
He said there was a “decent chance” that a two-year deal would be the best Congress could achieve.
“I don’t think any one division is too big to bridge. But they need to make a lot of different people happy in a lot of different areas, and everything they do is going to make someone unhappy.”
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