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Congress reaches year-end deal on taxes and spending

House Speaker Paul D. Ryan (R-Wis.) addressed the media Dec.16, after Congressional leaders agreed on a budget deal that would prevent a government shutdown. (Video: AP)

Congressional leaders on Tuesday night reached agreement on a year-end spending and tax deal that would prevent a government shutdown and extend a series of tax breaks that benefit businesses and individuals, according to lawmakers.

House Speaker Paul D. Ryan (R-Wis.) walked members of the House GOP conference through the deal at a meeting Tuesday night.

“Paul Ryan made a compelling case to support it tonight,” Rep. Reid Ribble (R-Wis.) said after leaving the session. “He feels that it’s time to start fresh, that we increase our hand and we’ll have better negotiating position if we have a strong Republican vote this year.”

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While the deal is in place, Democrats said they want to make sure what they agreed to is properly represented in the legislative text.

“We will review language to ensure that all of our agreements are drafted accurately,” said Kristen Orthman, a spokeswoman for Senate Minority Leader Harry Reid (D-Nev.).

House Minority Leader Nancy Pelosi (D-Calif.) said in a statement Wednesday morning that Democrats will continue reviewing the text of the omnibus and that “a number of concerns have arisen.”

The House and Senate are expected to pass the legislation by the end of the week. With government spending authority set to expire at the end of Wednesday, however, leaders plan to quickly move another stopgap spending bill that would give Congress until Dec. 22 to clear the year-end spending bill, more time than is likely needed.

The sweeping agreement that came after weeks of bipartisan negotiations is the broadest tax and spending deal since the January 2013 “fiscal cliff” agreement, which prevented automatic spending cuts from taking effect and shielded middle-class workers from tax increases while allowing some increases on the wealthy.

Both parties will be able to claim policy victories while bemoaning what also made it in or was left out.

“A lot of us feel like we didn’t get things we wanted, but we got some stuff that we did want, and I think that’s going to be true on both sides,” said Rep. John Kline (R-Minn.), the retiring chairman of the Education and Workforce Committee, who said he plans to support the agreement. “This is divided government, and if you’re going to move forward and follow Speaker Ryan’s notion that we want to move onto offense next year … then I think many of my colleagues will look at it like I do — that we need to move past this, get this done, let’s put 2015 behind us and get on to 2016.”

Ryan has portrayed the negotiations as a way to clear the decks for next year when under his leadership he promises a more methodical approach to moving appropriations bills.

“While not getting everything we wanted, the speaker noted that both packages include many provisions that Republicans have long fought for,” said AshLee Strong, a Ryan spokeswoman. “The speaker noted that though there are significant wins in these packages, we must not repeat this process and instead get back to regular order in 2016.”

Many House Republicans reserved judgment on whether they would support the proposals unveiled Tuesday, but most kept a positive attitude toward Ryan and the other GOP negotiators who cut the deal.

“The central players in this deserve a lot of credit for working this thing as hard as they did,” said Rep. Steve King (R-Iowa), who had been critical of former speaker John A. Boehner’s unwillingness to take a harder line on immigration. “What’s really good in there is really the atmosphere. It’s changed so much in a couple months.”

Ribble said Ryan played the best hand he was dealt through the budget deal negotiated by Boehner (R-Ohio): “No one can challenge Speaker Ryan’s ability to lead through these things, and he’s been doing a pretty good job here. They’ve been negotiating in pretty good faith and trying to make the best deal they could.”

But some conservative discontent was obvious, and it remained unclear whether that would metastasize into outright mutiny in the coming days.

Rep. Tim Huelskamp (R-Kan.), a member of the hard-line House Freedom Caucus, predicted that most Republicans would not support the omnibus spending bill and rejected Ryan’s suggestion that a big Republican vote would improve the GOP negotiating position.

“I don’t understand that at all — give the Democrats what they want now so next time they won’t want as much?” he said.

Ryan has committed to allowing members three days to review the agreement, setting up a potential Thursday vote in the House. That could slip to Friday because the legislative text of the spending deal was not released until early Wednesday morning.

The tax discussions were closely linked with talks on the year-end appropriations bill as negotiators attempted to trade priorities across the two must-pass bills.

But House leaders are expected to have to rely on some procedural maneuvers to pass the package, by holding separate votes on the tax and spending parts of the deal. If both pass they would likely be rolled into one package for the Senate to consider later this week.

The tax break package would cost about $650 billion and extend around 50 credits for businesses and individuals while also delaying until 2017 a tax on medical device manufacturers. The approximately $1.1 trillion appropriations package would fund the government for the remainder of fiscal 2016 and contains a two-year delay of the Affordable Care Act’s so-called Cadillac Tax on expensive employer-sponsored health care plans as well as a delay of a tax on health insurance plan purchases.

The spending bill also would lift the 40-year ban on crude oil exports. In exchange for allowing this provision, Democrats secured the extension of tax breaks for wind and solar energy producers for five years.

Many Republicans are reluctant to support the appropriations bill because it is the result of an earlier deal to increase spending over the next two years. House Democratic leaders, meanwhile, oppose the tax package because they argue it doesn’t do enough for lower-income workers and would make it more difficult to strike a tax reform agreement in the future by making breaks for businesses appear less expensive than those for middle- and low-income taxpayers.

“Republicans’ tax extender bill provides hundreds of billions of dollars in special interest tax breaks that are permanent and unpaid for,” Pelosi said in a statement. “These massive giveaways to the special interests and big corporations are deeply destructive to our future.”

The tax bill is expected to pass mostly with Republican votes while Democrats will deliver enough support for the spending bill to get it through the House.

The tax bill would permanently extend nearly two dozen tax breaks for businesses and individuals while temporarily extending others.

“After years of short-term extensions, good faith bipartisan compromise prevailed,” said Senate Finance Committee Chairman Orrin Hatch (R-Utah).

The credits being permanently extended include:

  • An expanded Earned Income Tax Credit for low-income earners;
  • The Child Tax Credit for low and moderate income workers;
  • The American Opportunity Tax Credit to help students under age 40 pay college tuition and expenses;
  • Low income housing credits;
  • An expanded research and experimentation credit;
  • Section 179 business expensing, which allows businesses to fully deduct the price of equipment and software investments;
  • State and local sales tax deduction;
  • Tax deductions for food inventory donated to food banks;
  • A deduction for land donated for conservation; and
  • A tax break for individuals to donate to charity from qualified retirement accounts.

The spending bill includes a compromise over cybersecurity legislation that would encourage businesses to share information with the government about potential cyberthreats. The issue has pitted businesses against privacy advocates and efforts to complete a cybersecurity bill dragged on for years. The issue gained special urgency in the wake of several data breaches at major companies and in the U.S. government. It does not, however, address the latest cybersecurity debate over encryption that arose in the wake of the Paris terror attacks.

The agreement also would:

  • Permanently reauthorize federal health benefits for emergency personnel who responded to the Sept. 11 terrorist attacks;
  • Put in place new security requirements for a visa waiver program, which the House passed as a stand-alone bill earlier this month. that has come under scrutiny following the Paris terror attacks. The legislation does not include new restrictions that would prevent Syrian and Iraqi refugees from entering the country, a provision House Republicans had pushed to get in the bill;
  • Freeze funding for the Internal Revenue Service and the Environmental Protection Agency; and
  • Repeal country-of-origin food labeling requirements.

Karoun Demirjian contributed to this report.

Correction: An earlier version of this report incorrectly labeled Rep. Nancy Pelosi’s political affiliation.