Tax and trade legislation

Included in the legislation enacted by Congress are provisions that:

•Let taxpayers with incomes of $65,000 or less ($130,000 for couples filing a joint return) deduct $4,000 for higher education costs.

The deduction is $2,000 for those earning up to $80,000 (or $160,000 with joint returns). The cost is $3.3 billion over two years.

•Extend through 2007 the option of taxpayers from states without income taxes to deduct state and local sales taxes.

The seven affected states are Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming. The cost is $5.5 billion over two years.

•Extend through 2007 a research and development tax credit that offers a 20 percent credit for new activities. The cost is $16.3 billion over five years.

•Extend through 2007 the welfare-to-work tax credit under which employers can get a maximum credit of $3,500 for the first year of employing a person who has received public welfare.

•Extend through 2007 the deduction of up to $250 for teachers who personally buy classroom supplies. The two-year cost is $379 million.

•Extend permanent normal relations with Vietnam, ending the Cold War rule that trade relations with the communist nation must be renewed every year.

•Extend and expand trade benefits for some 140 developing countries and extends trade agreements with Haiti, Sub-Saharan Africa and four Andean nations.

•Block plans to reduce by about 5 percent what Medicare pays to doctors, at a cost of about $4.5 billion.

•Provide a one-year extension of an exception process under which Medicare will pay for stroke or hip replacement therapy when costs exceed $1,740.

•Open up some 8.3 million acres along the Gulf of Mexico to oil and gas drilling.

•Renew a program, with increased federal contributions, for reclaiming abandoned mines. The cost is estimated at $5 billion over 10 years.

•Extend through 2008 various energy provisions now set to expire at the end of 2007, including tax credit for electricity produced from renewable resources, and tax credit for new energy efficient homes.