Senate approves large tax break for home buyers

WASHINGTON (AP) — The Senate voted Wednesday night to give a tax break of up to $15,000 to home buyers in hopes of revitalizing the housing industry, a victory for Republicans eager to leave their mark on a mammoth economic stimulus bill at the heart of President Barack Obama’s recovery plan.

The tax break was approved without dissent and came on a day in which Obama pushed back pointedly against Republican critics of the legislation even as he reached across party lines to consider a reduction in the spending it contains.

“Let’s not make the perfect the enemy of the essential,” Obama said as Senate Republicans stepped up their criticism of the bill’s spending and pressed for additional tax cuts and relief for homeowners.

He warned that failure to act quickly “will turn crisis into a catastrophe and guarantee a longer recession.”

Democratic leaders have pledged to have legislation ready for Obama’s signature by the end of next week.

Though they concede privately they will have to accept some spending reductions along the way, conservative Republicans failed in their initial attempts to force deep cuts in the bill.

On another contentious issue, the Senate softened a labor-backed provision requiring that only U.S.-made iron or steel used in construction projects paid for in the bill.

A move by Sen. John Mc- Cain, R-Ariz., to delete the so-called Buy American requirement failed, 31-65.

But with Obama voicing concern about the provision, the requirement was changed to specify that U.S. international trade agreements not be violated.

Democrats also preserved a key priority for Obama, a break of up to $1,000 for couples who pay payroll taxes but whose earnings are so low they do not pay income tax.

Sen. Johnny Isakson, R-Ga., who advanced the home buyers tax break, said it was intended to help revive the housing industry, which has virtually collapsed in the wake of a credit crisis that began last fall.

The proposal would allow a tax credit of 10 percent of the value of new or existing residences, up to a $15,000 limit.

Current law provides for a $7,500 tax break but only for first-time home buyers.

Isakson’s office said the proposal would cost the government an estimated $19 billion.

Democrats readily agreed to the proposal, although it may be changed or even deleted as the stimulus measure makes its way through Congress over the next 10 days or so.

Other GOP attempts to change the measure went down to defeat. The most sweeping of them, by Sen. Jim DeMint, R-S.C., failed on a mostly party-line vote of 36-61. It would have replaced the White House-backed legislation with a series of tax cuts on personal and business income and capital gains at the same time it made cuts passed during the Bush administration permanent.

“This bill needs to be cut down,” Republican Mitch McConnell of Kentucky said on the Senate floor. He cited $524 million for a State Department program that he said envisions creating 388 jobs. “That comes to $1.35 million per job,” he added.

After days of absorbing rhetorical attacks, Obama and Senate Democrats mounted a counteroffensive against Republicans who say tax cuts alone can cure the economy.