Congressional negotiators agree to extend some tax credits and add to debt 

WASHINGTON – Brewers, distillers, racehorse owners, churches with parking lots and some wind energy producers won federal tax breaks in a last-hour congressional agreement on taxes and spending that was unveiled Tuesday morning.

The tax-break bonanza has become a rite of passage in Washington, transcending partisan bickering and congressional rancor and allowing lawmakers to dole out special-interest tax breaks by attaching the provisions to must-pass legislation.

As in years past, the agreement reached on Tuesday capped months of contentious negotiations between lawmakers and the White House over whether to extend a series of tax credits and other breaks that were set to expire or had already ended. The temporary nature of those tax cuts often sets off a year-end scramble on Capitol Hill, with lawmakers trying to aid businesses and entities that have come to depend on various expiring credits and deductions.

Among the biggest changes tucked into the broader spending agreement is the elimination of taxes that were intended to fund the Affordable Care Act, including a tax on medical devices, health insurers and generous health plans.

The Cadillac tax, a proposal to tax high-cost, generous health insurance plans, was supposed to be one of the main ways the law paid for itself but never went into effect. The House voted overwhelmingly to repeal the tax this year.

The health insurance tax, which applied to health insurers, and the medical device tax, which applied to products like X-ray machines, pacemakers, artificial hearts and artificial hip and knee joints, have been sporadically carried out.

The agreement, which passed the House 297 to 120 on Tuesday, also extends tax benefits for railroad track maintenance, racehorse and racetrack ownership, hiring and investment on Native American reservations and some victims of natural disasters. A one-year extension was also given to winemakers, beer brewers and liquor distillers, allowing them to avoid tax increases of as much as 400 percent.

It also extends a handful of credits for renewable energy, like wind production, but does not include an extended credit for the buyers of electric cars.

Congressional staff and lobbyists were referring to the agreement on Tuesday as a “skinny” deal, which fell short of both Democratic and Republican ambitions for a more expansive effort that could have included additional aid to low-income families and fixes for errors written into the sweeping package of tax cuts that President Trump signed in 2017.

The year-end scramble also highlights the inability of Mr. Trump’s tax cuts to reduce businesses reliance on targeted tax credits and other breaks. The 2017 tax package cut the corporate tax rate to 21 percent, a move that Mr. Trump and Republicans said would reduce the need for companies to take advantage of specialized tax breaks that had been good for lobbyists but costly and inefficient for taxpayers.

Those provisions were usually made temporary for budgetary reasons, allowing lawmakers to provide a short-term tax break without adding to the 10-year federal budget deficit. But many have routinely been renewed, continuing to add to America’s fiscal woes.

The provisions in the deal will reward certain industries and businesses with tax breaks that could add more than $427 billion to the federal debt over the next decade, according to the congressional Joint Committee on Taxation.

“This is a gluttonous tax binge that has the desperate feel of politicians scrambling to heap political favors on powerful interest groups,” said Maya MacGuineas, the president of the Committee for a Responsible Federal Budget, “and there isn’t a single credible justification to defend it.”

Negotiators reached the deal hours before they were set to vote on spending legislation to keep the government fully funded through the end of the fiscal year. The package of extenders, through a procedural maneuver on the House floor, is expected to be attached to one of the spending packages up for a vote Tuesday.

It will then head to the Senate, which is expected to take up the legislation before government funding expires on Friday.

The agreement did not include the kind of significant increases in credits for low-income families that Democrats had hoped for and also fell short of Republicans’ hopes of correcting language in the 2017 tax law that has hurt some business owners, including a provision that accidentally reduced tax benefits for restaurant renovations. It also violates a long-running promise by fiscal conservatives to kill expiring tax credits once and for all.

“Regrettably, business as usual prevailed in our efforts to reform these supposedly temporary, annual tax policy changes,” said Representative Kevin Brady, Republican of Texas. “This annual temporary tax circus needs to end.”

Some senators and outside groups had also hoped to include measures to improve accountability and transparency in “opportunity zones,” a creation of the 2017 law that were pitched as an effort to boost struggling communities but have at times served to enrich wealthy developers and already affluent areas. None of those measures survived in the final agreement.

Congressional staff said that a broader agreement, including the extension of more tax credits, was at hand this weekend, but that White House officials and Treasury Secretary Steven Mnuchin ultimately rejected it. Mr. Mnuchin pushed for any larger deal to include the relief for restaurant owners, they said, but Democrats were unwilling to support it without more in return on their priorities.

“Republicans knew about these major errors at the time, but plowed ahead despite Democratic warnings,” Senator Ron Wyden, Democrat of Oregon, said in a statement. “Unfortunately, they refused to meet us halfway and agree to changes that would help working families make ends meet.”

Senator Charles E. Grassley, Republican of Iowa, said the agreement “may not be the package I’d have pushed for on my own, but it’s a reasonable way forward that provides certainty where before there was only anxiety for many Americans.”

The deal as agreed to includes a few reversals from the 2017 law. It eliminates a tax increase that hit the children and spouses of deceased members of the military, along with a new tax that was set to hit churches and other nonprofit organizations that offer parking to their employees.

Other winners in the agreement include movie, television and theater producers, who will continue getting a tax break that allows them to deduct up to $15 million of aggregate costs. Manufacturers of “energy efficient” residential homes will also be able to continue claiming a tax credit of up to $2,000 per home. And homeowners who install an electric charging station or other kind of renewable refueling station on their principal residence can continue claiming a $1,000 tax credit.

Still, those who support renewable energy panned the package, saying it does little to incentivize a shift to cleaner power.

Gregory Wetstone, the president of the American Council on Renewable Energy, called the package a “squandered opportunity” on Tuesday. “While A.C.O.R.E. supports the modest extensions in the package,” he said, “they will do little for renewable growth and next to nothing to address climate change.”

And those that advocate lower taxes said extending the special-interest tax breaks would do little to encourage investment and economic growth, in part because some of those extensions apply retroactively to tax years already gone by.

“Many of these tax provisions expired two years ago,” said Nicole Kaeding, an economist and the vice president of policy promotion at the National Taxpayers Union Foundation. “Retroactively extending these provisions doesn’t change economic behavior; we can’t change the past. All it does is provide a windfall to these companies years after their activities occurred.”