Congress Close to Approving Tax Package

The House voted overwhelmingly to expand offshore oil drilling and preserve a variety of popular tax breaks for families and businesses, and the Senate was poised early this morning to approve the package after lawmakers angry about trade provisions and the bill's $50 billion cost agreed to let the measure move forward.

Eight senators from textile-manufacturing states had sent a letter to Senate leaders yesterday threatening to block the bill unless they removed a proposal to lift tariffs on clothing manufactured in Haiti. And Senate Budget Committee Chairman Judd Gregg (R-N.H) delivered a blistering condemnation of the decision by Republican leaders to push the unwieldy collection of tax, trade, health and energy measures through Congress as a single package at the last minute, with few opportunities for debate or objection.

In a speech on the Senate floor, Gregg blasted the package as "arguably the largest budget-buster ever brought forward by the Republican Congress."

But the objecting senators could only delay the bill; they did not have the votes to kill it. As midnight approached and the futility of their efforts became clear, they signaled their intention to give up and let their colleagues go home.

In both chambers, lawmakers rushed to finish critical business before calling the 109th Congress to a close. Among the most important pieces of legislation: a resolution that will keep the government running through Feb. 15, which won final approval just before midnight. Because the Republican Congress failed to pass nine of 11 spending bills needed to fund government operations, the unfinished budget will be dumped onto incoming Democratic leaders, who take control when the 110th Congress convenes in January.

At the request of incoming House speaker Nancy Pelosi (D-Calif.), the resolution contains a provision to end the long-standing tradition of granting lawmakers automatic pay raises.

Throughout the day yesterday, negotiations over the tax-and-trade package consumed lawmakers, particularly in the Senate. With the trade measures under assault, House leaders delayed a vote on that portion of the package and focused first on the more popular tax provisions. By 367 to 45, the House voted to extend for two years nearly two dozen tax breaks, most of which expired in December 2005. They include a credit for research and development critical to many businesses, a reward for employers that hire former welfare recipients and a deduction for state and local sales taxes paid by people in states without income taxes.

If Congress had left town without extending the breaks, more than 19 million taxpayers would have faced higher taxes when they filed in April, said Senate Finance Committee Chairman Charles E. Grassley (R-Iowa).

The package also would repeal a $5,450 limit on contributions to health savings accounts, allowing taxpayers to shelter an unlimited amount of money as long as they choose certain insurance plans with high deductibles. It would stave off a scheduled 5.1 percent cut in payments to doctors who treat Medicare payments, and it would open 8.3 million acres in the Gulf of Mexico to oil and gas exploration.

The House approved the trade portion of the package by 212 to 184. That measure would grant permanent normal trading status to Vietnam and extend trade relations with some African and Andean countries, as well as some other developing nations. The measure also would allow some types of clothing made in Haiti to be imported duty-free. Supporters call the proposal a form of aid to one of the world's poorest countries, while opponents say it would destroy U.S. textile jobs by opening a tax-free door to Haitian goods manufactured with yarn and fabric from China.

Debate in the House was peppered with references to the imminent power shift in Congress. At one point, House Ways and Means Committee Chairman Bill Thomas (R-Calif.) complained that Rep. Charles B. Rangel (D-N.Y.) had not delivered a copy of a Democratic amendment on oil leases.

"You may not have received the amendment, but you received our best wishes on your birthday," Rangel said.

"That was two days ago. What have you done for me lately?" Thomas replied.

Rangel grinned. "We're saying goodbye."

Once through the House, the package was sent to the Senate, where an alarm briefly went up when Sen. Ted Stevens (R-Alaska) discovered that negotiators had failed to make good on a promise to include a provision that would save hundreds of Alaskan timber jobs. A separate bill was quickly drafted, approved by the Senate and shipped to the House.

Gregg made one last stand against the tax package, arguing that it does "grievous harm to the deficit." But he acknowledged that he did not have enough support to block the measure. Senate Majority Leader Bill Frist (R-Tenn) said the package was headed for a vote to halt debate and "ultimately, passage."

Staff writers Steven Mufson and Shailagh Murray contributed to this report.