October 4, 2008

Rescue Plan Has Dozens of Tax Breaks, Big and Small

The Associated Press


Millions of taxpayers, thousands of businesses and groups including solar-power developers and natural-disaster victims will see tax relief with the passage Friday of a $700 billion financial rescue plan.

The tax relief package attached to the rescue law promotes renewable-energy development and extends dozens of tax breaks, from the critical research and development tax credit to breaks for such narrowly focused groups as motor-sports racetrack owners, film producers and bicycle commuters.

Virtually all the tax breaks already exist. But many expired Jan. 1 for use in the current tax year, and the others would have expired three months from now.

The largest group of beneficiaries in the tax portion of the bill is about 20 million mainly upper-middle-income taxpayers. Without congressional action, the alternative minimum tax , which originally was supposed to affect only the very rich, would have added some $2,000 this year to the tax bill of these people, most earning under $200,000 a year.

The measure also has $8 billion in tax breaks for disaster victims, $5 billion for higher education tuition deductions and $400 million in deductions for teachers who buy school supplies with their own money.

There are $3 billion in deductions for residents of states without income taxes that have state and local sales taxes.

There are also some four dozen small provisions. Among them, with projected costs over 10 years:

Extending an expired provision that gives Puerto Rico and the Virgin Islands a rebate against excise taxes charged on imported rum - $192 million.

Establishing a tax credit ranging from $2,500 to $7,500 for purchasers of plug-in electric-drive vehicles - $758 million.

Exempting wooden practice arrows used by children from an excise tax of 39 cents per arrow. Oregon's two senators and two Wisconsin representatives previously introduced legislation calling for the action, saying the tax was meant for more expensive archery arrows and is untenable for makers of toy arrows that may cost only about 30 cents apiece. The Oregon senators said they didn't seek its addition - $2 million.

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