House votes to extend deduction for state, property taxes

WASHINGTON — The House voted Wednesday to extend $31 billion in popular tax breaks, including an income-tax deduction for sales and property taxes, to be financed with a tax increase on investment-fund managers and a crackdown on international tax cheats.

The 45 tax deductions and credits for businesses and individuals are scheduled to expire at year's end. The House voted 241-181 to extend them for a year, with only two Republicans voting in favor. The bill now goes to the Senate, which has rejected the tax increase on investment managers in the past.

The tax breaks include a sales-tax deduction that mainly helps people in the nine states without local income taxes, a property-tax deduction for people who don't itemize and lucrative credits that help businesses finance research and development. The nine states without a state income tax are Alaska, Florida, Nevada, New Hampshire, South Dakota, Texas, Tennessee, Washington and Wyoming.

The tax breaks are supported by Democrats and Republicans alike and are routinely extended each year, but there are big disagreements over the tax increases that would pay for them. The dispute, combined with the Senate's prolonged debate on health care, makes it unclear whether the tax package will be enacted this year.

The House bill would tax investment managers' fees as regular income, with a top tax rate of 35 percent, instead of as capital gains, with a top rate of 15 percent.