House Committee Approves Tax Cut Extensions

by Mike Godfrey, Tax-News.com, Washington

17 November 2005

The House Ways and Means Committee has approved a $56.6 billion tax cut bill which, unlike its Senate counterpart, will extend the capital gains and dividend tax cuts for a period of two years.

The bill, which was approved Tuesday on a 24-15 committee vote split along party lines, will extend the tax cuts until December 31, 2010, from their current expiry date of December 31, 2008 and will cost $26.7 billion over five years.

Lacking sufficient support for these provisions, a similar bill approved in the Senate Finance Committee earlier in the day omitted the tax cut extensions. Unlike the House version, the Senate bill, sponsored by Finance Committee chairman Charles Grassley, includes $13 billion in offsetting tax hikes and revenues raisers.

The Senate bill also differs from the House bill, sponsored by Ways and Means Committee chairman Bill Thomas (R - Calif), with its inclusion of a one-year fix to the Alternative Minimum tax which would reduce the number of taxpayers brought into its grasp.

Thomas stated that he decided to leave the AMT fix out of the House bill because "there are far wealthier people and fewer of them who would have a benefit under the alternative minimum tax."

Thomas's bill also includes a $4.8 billion provision to provide an exception from taxation under 'subpart f' of the tax code for certain overseas financing income, a measure called for by banks and financial services firms.

Additional items were also added to the House bill in separate votes, including: an expanded research and development tax credit for one year; a two year extension to more generous business expensing rules; an extension to a state and local income tax deduction through 2006; and several education-related expense deductions.

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