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WSJ: House Votes to Permanently Extend Research Tax Credit

Move sets up likely clash between Republicans and Obama

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Washington, May 20, 2015 | comments

WASHINGTON—The House on Wednesday voted to permanently extend a popular federal tax credit for research, in a move that foreshadows a likely clash between congressional Republicans and President Barack Obama later this year.

The vote was 274 to 145.

The legislation appears unlikely to become law on its own. But it could become a bargaining chip in a developing debate over taxes as well as highway funding.

The research break is one of about 50 targeted tax breaks that have been enacted repeatedly on a temporary basis.

Starting last year, congressional Republicans sought to extend a few of the largest and most popular ones on a permanent basis, without offsetting the budgetary cost through budget cuts or other means. Such permanent extensions could greatly simplify the task of overhauling the federal tax code.

But many Democrats including Mr. Obama have objected, arguing that the price tag of the permanent extensions would be too high. The permanent research credit, for example, would cost the government about $180 billion over the next decade.

Mr. Obama intervened late last year to scuttle a bipartisan deal on the extenders that likely would have made some of them permanent. Instead, they generally were re-enacted for 2014 only. Indications are that Republicans will try again this year for a package that includes some permanent extensions, such as the research credit. But it appears the White House will try to hold its ground.

The White House this week threatened again to veto the permanent research credit, accusing Republicans of a “double standard” that would cut taxes for businesses and the wealthy, while “slashing investments and programs that serve middle-class and working Americans in the name of fiscal rectitude.”

Still, with pressure growing for legislation to boost the economy and jobs—such as a tax overhaul and changes to boost U.S. infrastructure spending—the tax extenders debate eventually could become a vehicle for a broader tax deal, some lawmakers say. That could open the door to horse-trading over the extenders as well as other tax measures.

“We’re looking at all these options,” Rep. Charles Boustany (R., La.), an influential Ways and Means Committee member, said in a recent interview. He added that the environment for a tax rewrite is “a difficult landscape, but it doesn’t mean we’ll give up.”

The legislation approved Wednesday would make permanent and simplify the research credit, which has been criticized as too complicated.

In Wednesday’s debate, Democrats criticized Republicans for dragging their feet this year on a tax overhaul. Democrats and Republicans alike are hoping to use a tax rewrite to generate one-time corporate tax revenues that could boost spending on highways and other infrastructure.

Rep. Earl Blumenauer (D., Ore.) said that while Congress dickers, the U.S. is “falling behind [in infrastructure] while America falls apart.” He and other Democrats called on Republicans to hold hearings on how to finance more highways.

Democrats, including Rep. Mike Thompson of California, also complained about the bill’s cost.

“What I haven’t been able to understand…is how we can pass bills that help corporations and the wealthy [and] add all the cost of that to the deficit,” while also proposing to cut programs that help moderate-income households, he said.

Rep. Kevin Brady (R., Texas) said Democrats were being hypocritical, because they have frequently voted to extend the research break and other provisions without offsetting the cost.

He said infrastructure is being handled in separate negotiations, and suggested Democrats were willing to let U.S. research jobs migrate overseas by continuing to pass patchwork temporary extensions of the research break. “This is about funding the infrastructure of research,” he said.

Write to John D. McKinnon at john.mckinnon@wsj.com

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