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Bush threatens veto of House energy, business tax bill

The White House said President Bush would veto a House bill that provides $19 billion in tax incentives for renewable energy, and extends a raft of expired tax breaks for businesses and individuals.

According to a Wednesday Statement of Administration Policy, Bush will veto the bill if it includes prevailing wage requirements for projects financed by renewable energy bonds. The House bill authorizes $2 billion in bond authority to finance the construction of electric power plants that use wind, biomass, geothermal, or other alternatives to fossil fuels.

But House lawmakers also added a requirement that workers on such projects must be paid the prevailing local wage. The Bush administration has long opposed expanding the reach of the Davis-Bacon Act, the federal prevailing wage law in place since 1931.

The White House objections to the bill do not end there. Bush “strongly opposes” revenue offsets included in the bill that would delay a scheduled tax break for multinational corporations and raise taxes on some income earned by hedge fund managers, the statement said.

The House is expected to approve the $57 billion tax package Wednesday. The Senate could take up its own version of energy and tax extenders legislation in June.

The bill would extend highly sought after production tax credits for wind, geothermal and other types of energy, and investment tax credits for solar energy. It would extend for one year expired tax measures like the research tax credit, state sales tax deduction, and depreciation benefits for restaurant and retail property.

Bush supports continuing the tax breaks, and backs many of the energy tax proposals.

But to prevent the cost of those tax cuts from adding to the deficit, House Democrats added tax-increasing offsets. The bill would delay for 10 years a tax break, scheduled to take effect next year, that helps U.S. global firms lower their tax bill by giving them more flexibility in how they allocate interest.

The other would bar individuals from deferring compensation they earn offshore, and would have the largest effect on hedge fund managers.

“The Administration…strongly opposes the provision in the bill treating U.S. citizens with deferred compensation from certain employers, in all industries, more unfavorably than other U.S. citizens,” the Bush administration letter said. “Together, these provisions would increase tax burdens, undermine the competitiveness of U.S. workers and businesses, and could have adverse effects on the U.S. economy.”

The White House also opposes a provision in the bill that would let taxpayers who do not itemize take a deduction for property taxes. It opposes a provision that allows workers to exclude from income the value of group legal services plans provided by their employers.

-By Martin Vaughan, Dow Jones Newswires


21 May 2008