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WASHINGTON--Tucked into the "fiscal cliff" tax package approved by Congress are billions of dollars in tax breaks that should make the new year a lot happier for businesses of many stripes, including film producers, race track owners and the makers of electric motorcycles.
In all, more than 50 temporary tax breaks were renewed through 2013, saving businesses and individuals about $76 billion. Congress routinely renews the tax package, attracting intense lobbying--and campaign donations--from businesses and trade groups that say the tax breaks help them prosper and create jobs.
Businesses have grown used to many of the longstanding tax breaks, but they also have had to get used to the uncertainty of whether they will be renewed each year. This time around the tax breaks were allowed to expire at the end of 2011 as lawmakers struggled to reach consensus on a wide range of tax issues.
The package passed by Congress this week and signed by President Barack Obama renews the tax breaks retroactively, so taxpayers can claim them on both their 2012 and 2013 tax returns.
The biggest of the bunch, a tax credit for research and development, helps U.S. manufacturers compete against foreign competition, according to the National Association of Manufacturers. Another provision helps restaurants and retailers expand by allowing them to more quickly write off the costs, according to the National Restaurant Association.
These provisions have widespread support in Congress; others are more obscure.
For example, there is a tax credit for producing electricity from wind mills, a tax credit for buying electric-powered motorcycles, and tax rebates to Puerto Rico and the Virgin Islands from a tax on rum imported into the United States.
Sen. John McCain, R-Ariz., said the package is filled with "special-interest handouts" that make it difficult for him to justify his vote in favor of it.
"It's hard to think of anything that could feed the cynicism of the American people more than larding up must-pass emergency legislation with giveaways to special interests and campaign contributors," McCain said.
Lawmakers are wary of making the tax breaks permanent because of the cost, even though they inevitably renew almost all of them each year. Annual angst over whether the tax breaks will be renewed also provides incentives for businesses to lobby key lawmakers.
"All these provisions have a lobbying arm behind them, for the most part," said Mark Luscombe, principal tax analyst for CCH, a consulting firm based in Riverwoods, Ill. "If they only extend them for a year or two then the lobbyists have to keep coming back and bestowing their favors on congressmen to get the thing extended again."