Senate Democrats

Senate Democratic Leaders To McConnell: Stop Blocking Bill That Cuts Taxes, Invests In Renewable

Washington, DC—The Senate Democratic Leadership sent the following letter today to Senate Republican Leader Mitch McConnell, urging him to abandon his delaying tactics on The Renewable Energy and Job Creation Act of 2008 and reconsider his opposition to the legislation, which would provide badly needed tax relief for families and businesses and increase investments in renewable energy.  “The only thing more disturbing about the fact that you are blocking this much-needed tax relief is that your statements give the impression you are doing so in order to protect a small group of wealthy investment-fund managers,” the Senators wrote.  “Given the bill’s importance, we respectfully request that you and other Senate Republicans reconsider your opposition to the legislation and abandon your delaying tactics.” 

The text of the letter is below:

June 13, 2008

Senator Mitch McConnell
Republican Leader
U.S. Senate
Washington, DC 20510

Dear Leader McConnell:

We are writing to express our deep concern about the Republican filibuster that is preventing the Senate from considering H.R. 6049, the energy tax incentives/extender bill.  This bill would provide badly needed tax relief for families and businesses and, at a time of record oil prices, would help increase investments in renewable energy initiatives.  The only thing more disturbing about the fact that you are blocking this much-needed tax relief is that your statements give the impression you are doing so in order to protect a small group of wealthy investment-fund managers.  Given the bill’s importance, we respectfully request that you and other Senate Republicans reconsider your opposition to the legislation and abandon your delaying tactics.

As you know, H.R. 6049 would extend several tax benefits that help millions of families.  For example, the deduction for state and local sales taxes helps level the playing field and provides tax relief to residents in states with no income tax.  The tuition deduction helps families cope with the exploding cost of college.  The deduction for teachers’ out-of-pocket expenses for classroom supplies provides a small but important thank-you to millions of hardworking educators who reach into their own wallets to give their pupils the tools they need to learn.    

The legislation also would extend several tax benefits that help U.S. businesses remain competitive, such as the research and development credit and the active financing exception to the Subpart F rules.  In addition, the bill includes tax incentives to encourage the development of clean renewable energy sources, promote energy conservation, and assist our transition away from fossil fuels.

The Republican Caucus has justified its opposition to this legislation based on revenue provisions that would prevent the bill from increasing the deficit and the national debt.  The offsets would protect American taxpayers from being forced to pay more interest, largely to foreign creditors in countries like China and Japan.  Congressional Republicans recently were willing to accept revenue-raising measures to offset the HEART Act, which extended current tax benefits for members of the military and reserves.  In fact, that legislation was supported by 403 Members of the House and passed the Senate unanimously.  Thus, when Republicans now claim that they are opposed as a matter of principle to the use of revenue-raisers to offset tax extenders, such claims strike many as both hypocritical and crassly political.

Unfortunately, if Republicans continue to adopt this political posture, the consequences for our country would be very real.  House Democratic leaders have made it clear that they will not approve an extenders bill that increases the deficit.  If Senate Republicans continue to maintain the preposterous fiction that closing a tax loophole for multimillionaires amounts to a violation of fundamental principle, you will be denying tax relief to millions of middle-class Americans in the process.  It is hard to see how that would be good for the country or your political party, but the choice is yours.

Not only would the revenue-raisers in H.R.6049 protect ordinary taxpayers from being forced to pay more interest to foreign creditors, but these provisions are unopposed by the businesses that would be affected most directly.  The proposed delay in implementation of worldwide interest allocation would not raise anyone’s taxes and is hardly unprecedented.  Although this change was enacted in 2004, the original effective date also was put off for four years by President Bush.  Since this tax break has yet to go into effect, its delay would not increase the taxes currently being paid by the affected companies.

We are especially outraged that Republicans have blocked efforts to close a loophole that allows extremely wealthy hedge-fund managers and other executives to avoid paying tax on their earnings.  Some of these individuals are diverting a significant portion of their earnings to investment funds located offshore in tax-haven countries.  Such schemes allow these individuals to avoid paying tax for years, at the expense of other taxpayers.  H.R. 6049 merely would require that these earnings be taxed when earned – just like wages earned by decent, hardworking Americans.  If a teacher or firefighter must pay taxes on their income in a timely manner, why shouldn’t a hedge-fund manager?

It would be wrong for Republicans to force middle-class taxpayers to spend more on interest to foreign creditors in order to maintain an unjustified loophole being abused largely by the very wealthiest Americans.  Similarly, it would be disgraceful to hold middle-class tax relief, pro-environmental initiatives, and noncontroversial pro-business tax cuts hostage on behalf of this egregious loophole. 

On behalf of American taxpayers, we therefore urge you to reconsider your opposition to H.R.6049 and to end your obstruction of this important legislation.

Sincerely,

Senator Harry Reid                               Senator Richard J. Durbin
Majority Leader                                   Assistant Majority Leader

Senator Charles E. Schumer                 Senator Patty Murray
Conference Vice Chairman                   Conference Secretary

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