Washington – Rep. John Larson, D-1st District, abandoned his party and defied a White House veto threat Friday by voting for a tax bill he co-sponsored and has promoted for years.
But Larson is conflicted about the legislation that would make permanent a research and development tax credit for businesses. He voted against it last month when it was considered by the Ways and Means Committee.
“It’s hard to explain to the people in my district why I am so opposed to a bill that I voted for and sponsored,” Larson said. “People just want to know ‘Are you for it or against it?’”
Larson found himself between a rock and a hard place by partisan fighting and election-year posturing.
The research and development tax credit helps many Connecticut industries “from tool and die shops to United Technologies,” Larson said. “This is our backbone. This is our bailiwick.”
But the politically popular tax break expired at the end of the year – along with dozens of other tax measures called “extenders” because they are not a permanent part of the tax code and expire unless Congress renews them.
The R&D credit was just one of 55 temporary tax breaks to expire on Dec. 31. The full array includes tax relief for homeowners whose mortgages are “upside down,” a credit for wind farms that generate electricity, the ability to donate money from an IRA tax-free and a deduction for commuters who take the bus to work.
The American Research and Competitiveness Act of 2014 — approved in the House on a 274 to 131 vote Friday — only addressed the R&D tax credit.
That’s a reason all but 62 Democrats opposed the bill — excluding Larson and Reps Elizabeth Esty, D-5th District and Joe Courtney, D-2nd District, who also voted “yes.” Democrats also objected that the bill, which would make the R&D credit permanent, did not offset the cost of the tax break, estimated at $156 billion over 10 years.
“I strongly support the research and development tax credit, which spurs innovation, catalyzes research and development, and creates jobs,” said Rep. Jim Himes, D-4th District. “I also support making this credit permanent so that businesses can have the certainty they need year-to-year to make these investments. But we cannot continue to blow holes in the federal budget with large, permanent, unpaid-for tax cuts.”
Other Democrats accused Republicans of inconsistency in backing the R&D bill, while at the same time insisting other items be fully paid for — such as an extension of emergency unemployment insurance.
Minority Whip Steny Hoyer, D-Md., said when it comes to feeding children and “helping people who are unemployed through no fault of their own, assisting people struck by a vicious storm named Sandy — then there’s a lot of discussion on the Republican side about, ‘we have to pay for things.’ ”
Larson said GOP leaders who marshaled the legislation through committee and onto the floor “skewed the process.”
That’s’ why he said he sided with all Democrats in the Ways and Means Committee to vote against this own bill.
“I stood up [at a caucus meeting] and said ‘for the sake of unity, I’m willing to fight it,” Larson said.
But Larson said he voted for final passage of the bill because of “a bigger issue.” He said Connecticut companies depend on it and need the certainty that would come with making the R&D credit permanent.
“We’ve been living year to year, tax credit to tax credit, and we don’t have certainty,” he said.
On Thursday, the White House threatened to veto the bill.
The Office of Management and Budget said President Obama supports making the R&D credit permanent – but it must be paid for.
“If this same, unprecedented approach of making major traditional tax extenders permanent without offsets were followed for the other traditional tax extenders, it would add $500 billion or more to deficits,” said a statement from the Office of Management and Budget.
Larson said he expects his bill will falter in the Senate, which favors a two-year extension of the R&D tax break.
As for his own struggles with the legislation, Larson said, “I think it was a principled position.”