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Tax bill includes lucrative credits

WASHINGTON — A host of industries, from Caribbean distilleries to Hollywood producers, would gain billions in tax breaks and other subsidies under compromise tax-cut legislation now moving its way through Congress.

The $858 billion package approved by the Senate on Wednesday is focused primarily on continuing the Bush administration tax cuts for two years, extending unemployment benefits and other large-scale expenditures. But buried inside the legislation are more than $55 billion in other giveaways and tax reductions for some of Washington's most influential industry groups.

Here are some examples:

• Energy and agricultural industries, for example, would continue to receive a generous ethanol tax credit at a cost to taxpayers of about $6 billion in 2011. The 45-cents-per-gallon credit goes to fuel blenders — including large oil and gas companies such as Shell — which count it against income tax owed to the United States.

• U.S. technology companies such as Microsoft would continue to benefit from a credit for research and development carried out in the United States, costing taxpayers about $6 billion.

• Rum makers in Puerto Rico and the U.S. Virgin Islands would get another two-year extension of excise tax credits for their products ($235 million).

• Movie and television producers would enjoy special deduction rules for U.S.-based projects ($162 million).

• Owners of NASCAR tracks and other motorsports facilities would benefit from two more years of a tax policy making it cheaper for them to fund capital projects. Estimated cost to taxpayers: $40 million.

Steve Ellis, vice president of Taxpayers for Common Sense, a watchdog group, said many of the breaks had stalled under House rules aimed at ensuring that new spending is paid for with cuts or revenues. But the push for tax-cut legislation, he said, has "opened up the floodgates."

"Most of these are sweeteners that don't get vetted or re-evaluated," Ellis said. "They're just sort of on autopilot."

The group is particularly critical of the ethanol provision, which has cost taxpayers more than $21 billion since 2006. The Government Accountability Office recently concluded that the credit has had little impact in encouraging ethanol use or production, especially since the government already mandates rising levels of ethanol use in gasoline and protects the corn ethanol industry through tariffs.

"This tax credit is really just lining people's pockets," Ellis said.

Tax bill includes lucrative credits 12/16/10 [Last modified: Thursday, December 16, 2010 8:54pm]
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