UPDATE 1-U.S. House tax panel backs costly corporate tax breaks

Tue Apr 29, 2014 3:19pm EDT

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WASHINGTON, April 29 (Reuters) - Six temporary tax breaks for corporations that would cost U.S. taxpayers $310 billion over a decade would be made permanent under measures approved by a Republican-controlled U.S. House of Representatives committee on Tuesday.

The federal research and development tax credit for businesses was among provisions approved by the House Ways and Means Committee. That and the five other measures have a long road ahead before they could become law.

"By making these six bipartisan policies permanent, businesses small and large will have the ability to plan for the future," Representative Dave Camp, the Republican chairman of the committee, said in a statement.

Consideration by the full House and the Senate are still needed and members of both chambers are increasingly preoccupied with getting re-elected in November, suggesting meaningful tax policy decisions may not come soon.

But corporate lobbyists, who have pushed lawmakers for weeks to support the legislation, were certain to take note of the committee's action, which drew criticism from Democrats who said the tax breaks lacked revenue sources to pay for them.

When Congress hands out tax breaks, the government gives up future tax revenue, which increases the federal deficit. Sometimes lawmakers from both parties insist tax breaks be offset by new tax revenue measures; sometimes they do not.

"Today, the committee gave partisan approval for six unfunded corporate tax breaks," Democratic Representative Lloyd Doggett said after the committee voted.

In addition to voting in favor of renewing the R&D tax break, Camp's committee voted to expand the break to 20 percent from 14 percent of qualifying business expenses.

Other measures in the package included tax breaks known as the "active financing exception" and the "look-through rule." Both are used by many multinational businesses to avoid U.S. taxes by sheltering foreign profits overseas and shifting profits from unit to unit worldwide.

Each of the tax breaks voted on were among temporary U.S. tax laws that are routinely renewed. For instance, the R&D credit has been extended 15 times since it was enacted in 1981. It technically expired at the end of 2013, along with several other so-called tax "extenders."

The 10-year, $310 billion cost of the package was estimated by Congress' Joint Committee on Taxation.

Representative Sander Levin, the top Democrat on the panel, called Republicans' votes for the package "fiscally irresponsible and fundamentally hypocritical." (Reporting by Patrick Temple-West; Editing by Kevin Drawbaugh and Dan Grebler)

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