From msnbc.com's Tom Curry: The tax cut-spending accord that President Obama announced Monday has been put into the form of legislation unveiled Thursday night by Senate Majority Leader Harry Reid. A summary of the bill is on Senate Finance Committee web site.
The bill would continue through the end of 2011 a variety of tax credits, deductions, and incentives that help taxpayers and industries across the nation.
Depending on your particular interest, there may be a provision in the bill that you'll like:
- Do you want to help rebuild parts of New Orleans devastated by Hurricane Katrina? Back in 2005, Congress authorized tax-exempt bonds to help rebuild areas hit by Katrina, but that tax break was to expire at the end of this year. The bill would allow the tax-exempt bonds to be issued through the end of next year. It also extends a tax credit for rehabilitating historic structures in "the Gulf Opportunity Zone" which includes parts of Alabama, Mississippi and Louisiana.
- Do you believe in mass transit as a way of reducing congestion and pollution? The bill continues a tax break for employer-provided transit and vanpool benefits. The nonpartisan staff of the Joint Committee on Taxation estimates that this break is worth about $500 million a year to workers.
- Do you want to wash your laundry in an energy-efficient way? The bill maintains a tax break for U.S.-based manufacture of energy-efficient clothes washers and other appliances. The credit for the production of energy-efficient appliances is worth about $100 million a year to corporations.
- Do you want to help a school teacher? Elementary and secondary school teachers who pay out of their own pocket for books and supplies for their classrooms can deduct $250 worth of those expenses. This tax break is worth about $200 million a year to teachers.
- Do you want to buy a house in our nation's capitol? The bill continues through next year a $5,000 tax credit for first-time home buyers in the District of Columbia.
There are several other such provisions in the bill, benefiting interests from Midwest farmers (ethanol tax credits) to people investing in American Samoa.
Just last week the members of Obama's fiscal commission recommended eliminating such tax expenditures, or as co-chairman Alan Simpson calls them "tax earmarks."
"We don't use the phrase 'tax expenditures' any more – that's a fake," Simpson said. "Tax earmarks are spending by another name… and they just chip away revenue."
By eliminating tax preferences, "We can broaden the base, simplify the (tax) code, reduce (tax) rates, and pay the deficit down between $80 billion and $180 billion a year, every year," said commission co-chairman Erskine Bowles.
Commission member Sen. Kent Conrad, D- N.D., who is chairman of the Senate Budget Committee, said the tax expenditures "really have run out of control."
Another member Sen. Dick Durbin, D- Ill., said, "I've been in Congress and around Congress for 29 years. We've never had this conversation. We have never put everything on the table and said, 'Now, what's important?' We just incrementally, year after year, make modifications in a tax code that most people never read or understand and think that it really doesn't have any impact."
Both Durbin and Conrad voted for the Bowles-Simpson deficit-cutting proposals.
In all, tax expenditures add up to $1.1 trillion a year in benefits to taxpayers – or putting it another way, $1.1 trillion in revenues the federal government would otherwise get. To put that number in perspective, the federal budget deficit in fiscal year 2010 was $1.3 trillion.
Of course, the big tax "earmarks" are not the ones for energy-efficient clothes washers and rehabilitating historic buildings.
The two biggest are the long-standing tax breaks that benefit millions of Americans workers and homeowners: the deduction for interest paid on home mortgages, about $120 billion in 2011, and the tax-free status of employer-provided health insurance, worth $115 billion in 2011.