By Jim Abrams
Associated Press
Wednesday, September 17, 2008

Senate leaders said yesterday that they had broken a months-long impasse over a tax-break package that would bring billions of dollars in relief to individual and business taxpayers, developers of clean-energy resources and people threatened by the alternative minimum tax.

Senate Finance Committee Chairman Max Baucus (D-Mont.) and his Republican counterpart on the panel, Charles E. Grassley of Iowa, said the package could reach the Senate floor this week. The tax package is one of the last major issues that Congress must address before its scheduled adjournment for the year.

The agreement includes some $17 billion in clean-energy tax incentives and provides for a fix, at an estimated cost of $64 billion over 10 years, to shield more than 20 million taxpayers in danger of getting hit by the alternative minimum tax.

The AMT was enacted in 1969 to catch a small number of very rich tax dodgers, but was never adjusted for inflation and hits more upper-middle-level income people every year unless Congress acts to protect them.

The Baucus-Grassley measure would also extend numerous targeted tax breaks that expired at the end of last year or are set to die out at the end of this year. Those include tax breaks for college tuition, state and local sales taxes, and research and development for U.S. businesses.

The compromise has the blessing of Senate Majority Leader Harry M. Reid (D-Nev.) and Republican leader Mitch McConnell of Kentucky.

Reid and the Democrats have made several attempts this year to advance a tax relief package, but have been thwarted by Republicans objecting to Democratic proposals to offset the costs of the relief.

Baucus and Grassley said the clean-energy tax incentives would be paid for with such measures as freezing the tax deduction for the domestic manufacturing activities of American oil and gas companies and tightening the rules by which oil and gas companies pay taxes on income earned overseas.