Possible tax deal would give big wins to both parties

WASHINGTON -- White House and congressional negotiators searched for compromise Thursday on huge tax and spending bills with a combined price tag of well over $1 trillion, with leaders hoping to clinch agreements and let Congress adjourn next week for the year.

"Not everybody gets what they want when you negotiate in divided government," House Speaker Paul Ryan, R-Wis., told journalists, a nod toward the tough bargaining so far between President Barack Obama and the GOP-controlled Congress. "But I think we will complete this."

On the spending side, lawmakers were seeking a deal on a $1.1 trillion measure financing federal agencies in 2016.

To give negotiators time, the Senate approved a short-term spending bill that lasts until Wednesday; the House was expected to pass it today.

Agreement was close on the numbers, but flashpoints included GOP efforts to ease laws regulating the financial industry and weaken Obama attempts to reduce air and water pollution and loosen travel restrictions to Cuba.

With talks continuing and current spending expiring Saturday, Congress planned to pass legislation today averting a government shutdown, keeping agencies open through Wednesday.

Negotiators also were hoping to strike a deal on a separate revenue bill that could cost $700 billion or more over 10 years by extending dozens of mostly obscure tax cuts.

That package also could deliver major political victories for Obama and Ryan.

With little more than a year left in office, and facing a frequently hostile GOP-led Congress, Obama was hoping an agreement would burnish his legacy by making permanent some expiring tax cuts for millions of families with lower-to-middle incomes, younger children and college students.

Many congressional Democrats would revel in achieving that, especially with uncertainty about which party will control both ends of Pennsylvania Avenue in 2017.

Enactment would mean "one of the strongest anti-poverty efforts in a long time," said Oregon Sen. Ron Wyden, top Democrat on the tax-writing Senate Finance Committee.

Republicans wanted to make permanent expiring business tax breaks worth perhaps hundreds of billions of dollars.

Ryan and GOP lawmakers in the Senate and House would consider that alone to be a victory.

"There's nothing pushing us apart," House Ways and Means Committee Chairman Kevin Brady, R-Texas, said of bargainers' efforts to complete a deal to enact tax cuts permanently that are priorities for both sides. "So let's stay at that until we get it done."

Yet for Ryan, accomplishing that also would make one of his top 2016 priorities more affordable -- an election-year bill revamping the tax code.

Renewing those business tax breaks now would mean he wouldn't have to include them in next year's sweeping overhaul, freeing up money Republicans instead could use to help push income tax rates lower.

But obstacles remained.

Around 50 tax breaks for individuals and businesses expire annually, and Congress goes through a once-a-year ritual of renewing them.

That's largely because of political optics: A short-term tax cut has a much smaller price tag than a long-term reduction, making it easier for many lawmakers to support.

This year's collection would renew many tax reductions that expired at the beginning of 2015.

The legislation Congress is working on would restore and extend them retroactively so taxpayers could claim the breaks on their 2015 and 2016 returns.

The reductions for individuals include breaks for some out-of-pocket expenses by teachers, charitable contributions seniors make from the Individual Retirement Accounts and parking expenses.

On the business side, reductions include breaks for some railroad-track maintenance, training mine-rescue teams, race horses and building energy-efficient homes.

Obama and Democrats were trying to make permanent tax credits of up to $1,000 per child that go to many lower- and middle-income families; tax credits up to $2,500 for college students; and earned-income tax credits for low-income married couples and families with three or more children.

Unless Congress acts, those tax breaks will become smaller starting in 2018.

In one unresolved dispute, House Minority Leader Nancy Pelosi, D-Calif., is pushing for annual inflation increases in the child tax credit, while Republicans wanted steps they said would help prevent fraud, such as requiring recipients to provide Social Security numbers or other identifying information.

Republicans want to make permanent the ability of people in states without an income tax to deduct local sales taxes on their federal returns; tax breaks businesses get for research and development costs and for buying new equipment; and some levies on companies doing business overseas.

The GOP also wants to end the decades-old ban on U.S. oil exports. Democrats were insisting on trade-offs, including making permanent tax breaks for solar and other alternative-energy sources.

The White House, against the will of some congressional Democrats, was resisting Republican attempts to pare taxes on medical devices and costly health-insurance policies enacted under Obama's 2010 health-care law to help pay for that overhaul.

"We're always willing to engage in conversations about ways to strengthen the ACA that don't harm health-care access, affordability, quality or the middle class," said White House spokeswoman Katie Hill, using the acronym for Obama's Affordable Care Act.