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House GOP splits Dems on business tax cut

Republicans successfully overcame fierce opposition—and a White House veto threat—to the bill, bringing 62 Democrats along with them.
Yoshino Cherry trees are in bloom in front of the U.S. Capitol on April 9, 2014 in Washington, D.C.
Yoshino Cherry trees are in bloom in front of the U.S. Capitol on April 9, 2014 in Washington, D.C.

House Republicans successfully overcame fierce opposition to a bill for a permanent R&D tax cut, bringing 62 Democrats along with them.

The legislation easily passed on a 274- 131 vote Friday morning, despite fierce lobbying by Democratic leaders and the White House's threat to veto the $156 billion bill, which would expand the R&D tax credit that expired in December and make it permanent.

Republicans celebrated the "strong bipartisan support" behind the bill, which setting the House up for a showdown with the Senate over business tax breaks. More than 60 temporary tax credits expired last year, the vast majority of which would benefit large corporations, multinationals, and special interests. 

House Republicans deliberately moved forward with the tax credit with the broadest bipartisan support. Many of the Democrats who broke from their party to support the bill hailed from California, Massachusetts, Virginia, the Pacific Northwest, and other states with strong IT, biotech, and other R&D-heavy industries, joining the business interests and policy experts who've lined up behind the bill. 

"Today’s House passage of a stronger, permanent R&D tax credit is an important step forward in increasing investment in the United States to create high-wage jobs," the National Association of Manufacturers said in a statement.

Democratic leaders are angry that Republicans want to make a few of these tax cuts permanent without paying for them, breaking from their commitment to a comprehensive overhaul that would force stakeholders to make tradeoffs in exchange for lower rates. 

“Both parties, as the Chairman has indicated, have repeatedly supported temporary extensions, but neither have had the audacity to come to this floor and say ‘we’re going to borrow enough to make it permanent, without closing a single loophole,’" Rep. Lloyd Doggett said on the House floor.

The tax cut has turned Democrats and their progressive supporters into fire-breathing deficit hawks. “This bill represents only the first of many installments of hundreds of billions of dollars that the Republicans plan to finance with more debt, borrowing from the Chinese, or whoever will lend it to us," Doggett said. 

“The public will be shocked to learn that after years of fighting over how to reduce the deficit, some members of Congress have decided that deficits don’t matter at all when it comes to doling out corporate tax breaks," Frank Clemente, Executive Director of Americans for Tax Fairness, said in a statement.

The House's Friday vote wouldn't be enough to override a presidential veto, which would take 290 members. But it complicates the Senate's hope of passing an $85 billion two-year extension of the business tax breaks, setting up a battle that may have to wait until after the midterms to get resolved.

The Senate Democratic bill isn't paid for either, but Democrats says it's intended to be a stopgap measure to drive a comprehensive tax overhaul, rather than cherry-pick certain provisions to make permanent. 

"The window of opportunity to enact comprehensive tax reform that both the business community and individual taxpayers desperately need is short," Sen. Ron Wyden, chair of the Finance Committee, writes in a Wall Street Journal op-ed. "Recognizing the unique dynamics that come with a presidential election, there is just over a year to get the job done."

But it's increasingly doubtful that a sweeping overhaul will happen any time soon. Wyden's GOP counterpart, House Ways and Means Chair Dave Camp, is already headed for the exits after 2014, and few are hopeful that Congress will find a renewed bipartisan spirit right after the midterms.

Robert Atkinson, president of the Information Technology & Innovation Foundation, doesn't expect a comprehensive tax until 2017 at earliest, which is why he's urging Congress and the White House to act on smaller provisions now. “Given that the Obama Administration has publicly supported increasing the R&D credit and making it permanent, it is troubling that they are now threatening to veto this pro-growth measure,” he said in a statement after Friday's vote.