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Last-minute rush extends tax breaks  

In its last hours of GOP control, Congress passed a raft of bills big and small, most significantly a sweeping bill reviving expired tax breaks, extending trade benefits for developing countries and protecting doctors from a big cut in Medicare payments.

Republicans dumped an unfinished budget on the Democrats about to take power, with the Senate barely meeting a midnight deadline to pass a stopgap spending bill putting the government on autopilot until Feb. 15.

Democrats now face difficult choices and weeks of work on the leftover budget, which totals $463 billion and must be passed at President Bush’s strict budget limits.

Democrats made good on a promise to block an automatic congressional pay raise until the minimum wage is increased. Under pressure from future House Speaker Nancy Pelosi, a California Democrat, and Sen. Harry Reid, the Nevada Democrat who will be majority leader, GOP leaders added language to the stopgap funding bill stopping the pay raise slated for Jan. 1 until Feb. 16.

Now, if the pay raise goes into effect Feb. 16, members would lose about $320 of their anticipated $2,800 annual increase. That raise would be $3,300 if Congress acts to boost the cost-of-living allowances for all federal employees in 2007. Currently, rank-and-file members get $165,200.

Highlights of last-minute legislation, including tax and trade provisions, that Congress acted on Friday and sent to the president:

“¢ Lets taxpayers with incomes of $65,000 or less ($130,000 for couples filing a joint return) deduct $4,000 for higher education costs. The deduction is $2,000 for those earning up to $80,000 (or $160,000 with joint returns). The cost is $3.3 billion over two years.

“¢ Extends through 2007 a research-and-development tax credit that offers a 20 percent credit for new activities. The cost is $16.3 billion over five years.

“¢ Extends through 2007 the welfare-to-work tax credit under which employers can get a maximum credit of $3,500 for the first year of employing a person who has received public assistance.

“¢ Extends through 2007 the deduction of up to $250 for teachers who personally buy classroom supplies. The two-year cost is $379 million.

“¢ Extends through 2007 the option of taxpayers from states with limited or no income taxes to deduct state and local sales taxes. The affected states are Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming. The cost is $5.5 billion over two years.

“¢ Extends permanent normal relations with Vietnam, ending the Cold War rule that trade relations with the communist country must be renewed every year.

“¢ Extends and expands trade benefits for 140 developing countries, and extends trade agreements with Haiti, sub-Saharan Africa and four Andean nations.

“¢ Blocks plans to reduce by about 5 percent what Medicare pays to doctors, at a cost of about $4.5 billion.

“¢ Provides a one-year extension of an exception process under which Medicare will pay for stroke or hip-replacement therapy when costs exceed $1,740.

“¢ Opens up about 8.3 million acres along the Gulf of Mexico to oil and gas drilling.

“¢ Renews a program, with increased federal contributions, for reclaiming abandoned mines. The cost is estimated at $5 billion over 10 years.

“¢ Extends through 2008 various energy provisions now set to expire at the end of 2007, including a tax credit for electricity produced from renewable resources, and a tax credit for new energy-efficient homes.

“¢ Approved a bill to keep open a special investigative office that has unearthed millions of dollars in waste and fraud in the rebuilding of Iraq

“¢ Approved a bill to make it easier for the estimated 50 million families caring at home for adults and children with special needs to find respite care, at a cost of $289 million over five years.

By Andrew Taylor, Associated Press


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