Senate's proposed bill attaches tax break

As part of the Senate’s economic rescue plan passed Wednesday night, solons attached a tax-break bill that would benefit numerous businesses, including Hollywood. But the attached bill could be a reason why the House may reject the rescue plan.

The tax breaks lack revenue-generating measures that would offset the estimated $50 billion cost to the U.S. Treasury over the next 10 years. So-called paygo measures, or pay-as-you-go, have in the recent past been deemed absolutely necessary by House Blue Dog Democrats, a socially and fiscally moderate coalition of 44 Dem representatives, for their support of any tax breaks.

Included among the breaks are incentives to reduce or eliminate runaway production — movies and television shows shot outside the U.S. due to tax reasons — by allowing producers to immediately deduct production costs up to $15 million, even if the budget exceeds that amount. Previously only movies with total budgets less than $15 million could be deducted as such; production costs above $15 million had to be amortized.

The breaks also include an MPAA-supported reduction of the current 35% tax rate for producers to 32%.

Last May, the House passed a bill that extended existing tax breaks; the bill covered those breaks by closing some corporate loopholes in the tax code. But in its version of the bill, the Senate reopened those loopholes, mainly because of vote-withholding Republicans who argued that existing tax breaks do not qualify as new and therefore don’t require new offsets.

The Senate bill stalled because House Blue Dogs threatened to vote against accepting it without paygo provisions.

“The fight has always been about whether those revenue provisions would go back into the bill,” said a House source close to the negotiations. “But then the Senate did a clever thing by attaching the bill to the economic rescue plan, which is considered must-pass legislation. The question now is whether the Blue Dogs will hold their nose and vote for it, or reject it because of the attached tax-extension bill.”

Blue Dog representatives did not respond to requests for comment.

According to Bloomberg News, 22 House Blue Dogs were among the 228 who voted against the bailout package Monday. By Thursday afternoon, only four had declared they would support the new Senate package with the tax breaks. Even if the 205 who voted for the previous rescue plan Monday vote “yes” again for the new one, at least nine other previous naysayers will have to switch their vote.

The House is expected to take up the package today, but House Majority Leader Steny Hoyer (D-Md.) told reporters Thursday that the level of Democratic support for it hasn’t increased appreciably, thus there will be no vote on it until he is “sufficiently confident” the package will pass.

The New York Times reported Thursday that Hoyer intended to vote for the package even though he, too, supports paygo provisions on spending bills. The state of the economy, he said, was more important.

But it is unclear how many House Dems will join Hoyer, given the “take-it-or-leave-it” manner in which the Senate sent the package to the House, as the House source put it.

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