By Kim Dixon
WASHINGTON (Reuters) - If a congressional hearing on Thursday is any indication, U.S. lawmakers will have a hard time breaking the stand-off over where to trim the fat in the federal tax code.
Nearly every lawmaker who testified at a panel on the individual merits of $35 billion in tax breaks came out in favor of making their pet provisions permanent.
Tax breaks - ranging from a popular corporate research credit to a subsidy for Puerto Rico that critics say benefits big rum producers - were the topic before a tax-writing subcommittee of the U.S. House of Representatives.
It was "members' day" when congressmen and women have the chance not only to defend the policies they like, but also to attack those they deem no longer useful.
"For too long Congress has simply rubber stamped the extenders package" without regard to economic development, job creation or other potential benefits, said Rep. Pat Tiberi, the Republican chairman of the House panel reviewing the breaks.
Still, most of the testimony was in favor of the breaks.
Republican Geoff Davis of Kentucky said he backs broad-based tax reform but insisted that some tax breaks were vital to the country's economic health and job creation. He defended the research tax credit.
Republican Steve King, a staunch spending hawk who has clashed with Republican leaders over federal spending, testified for renewal of a wind energy tax credit, enjoyed by many in his home state of Iowa.
Democrat Richard Neal relished the Republican support for alternative energy projects, acknowledging that for once he was on the same side as King, with whom he often clashes on other policy issues.
Tax breaks are only a fraction of the fiscal decisions effectively on hold until the lame-duck session of Congress that runs from after the November 6 elections until the swearing-in of the president and a new Congress in January 2013.
Pundits in Washington brand this coming period "Taxmageddon" or the "Fiscal Cliff" in reference to the expiration on December 31 of temporary tax cuts made under both George W. Bush and Barack Obama, the start of huge budget cuts ordered last year and the yet-to-be-determined fate of existing tax breaks.
Taken together, the tax breaks examined on Thursday are known on Capitol Hill as "extenders," meaning that all were designed in theory to be temporary parts of the tax code.
Congress for years has routinely extended them, but they have faced more scrutiny amid concerns about a burgeoning federal debt.
Business lobbyists expect the tax breaks, which expired last year, to be renewed retroactively at year's end. But there is some worry because of lawmakers' increasing interest in offsetting their cost.
That will be easier said than done, since each of the tax breaks has an interest group behind it.
Other breaks examined, with Congressional Research Service estimates of how much money each one annually costs U.S. taxpayers:
* Tax deferral for banks' foreign financing income; $5 billion
* Depreciation break for restaurant and retail improvements; $3 billion
* Incentives for certain alcohol fuels; $5 billion
* Subsidy to Puerto Rico and the Virgin Islands to spur economic development, shared with companies, including Diageo, which sells Captain Morgan's rum and other spirits; $13 million
* Seven-year cost recovery period for motorsport racing facilities; $29 million
Kansas Republican Mike Pompeo was one of a few lawmakers to oppose tax breaks. Pompeo is sponsor of a bill to scrap a slew of energy tax credits.
Tax breaks riddle the U.S. tax code and make many lawmakers want to start anew and overhaul the code. But that project is a big one and will not likely begin in earnest until 2013.
In the interim, the presidential and congressional elections coming up in 28 weeks will largely set lawmakers' agenda, including the contours of any revamp of the tax code, however hard that may be to achieve.
(Reporting by Kim Dixon; Editing by Howard Goller and Dan Grebler)