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House passes corporate-tax overhaul

By MARTIN CRUTSINGER
The Associated Press

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The measure was approved on a 280-141 vote, sending it to the Senate, where it was expected to be approved before the end of the week, when lawmakers hope to adjourn to hit the campaign trail.

Supporters argued that the centerpiece of the legislation — tax relief for U.S. factories — was critically needed to aid beleaguered manufacturers who have suffered 2.7 million lost jobs over the past four years.

But opponents charged that the tax package had grown into a massive giveaway that will add to the complexity of the tax system and end up rewarding multinational companies that move jobs overseas.

"It's Christmas in October for multinational companies and lobbyists with friends in high places," said Rep. Charles Rangel, D-N.Y. "But if you are a worker concerned about manufacturing jobs moving overseas, it's still the season for Halloween horrors."

Government watchdog and deficit-reduction groups expressed disappointment with the vote.

Key elements of corporate tax bill Key provisions of the corporate tax bill approved yesterday by the House with cost estimates over 10 years from the Joint Committee on Taxation: Repeal tax break for American exporters that World Trade Organization found violated global trade rules. Savings: $49.2 billion. Close loopholes and tax shelters. One of the provisions to save $2.4 billion would tighten deduction rules for donating cars to charities. Total savings: $81.7 billion. Cut taxes for manufacturers and other domestic producers, a category which would include such non-factory operations as construction companies, engineering and architectural firms, film and music companies, and the oil and gas industry. Cost: $76.5 billion. Revise rules governing treatment of multinational corporations including allowing companies with overseas operations to bring profits back to the United States at a reduced rate for a limited time. Cost: $42.6 billion. Reinstates the deductibility of state and local sales taxes on individuals' federal income tax returns, which will primarily benefit residents of Florida, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming, all of which have a state sales tax, and Alaska, which has local sales taxes but not a state sales tax. Cost: $5 billion for a deduction that would last only until Dec. 31, 2005. Reduce excise taxes on the sale of bows and arrows, fishing tackle boxes and sonar fish finders. Cost: $24 million. Source: The Associated Press

"This bill is an orgy of 276 special-interest tax breaks and giveaways that amounts to a cynical attempt to bribe swing states in one of the closest elections in our nation's history. Ethanol, tobacco bailout, breaks for NASCAR — you name it," said Keith Ashdown of Taxpayers for Common Sense.

But House Ways and Means Chairman William Thomas, R-Calif., argued that the legislation was urgently needed to end sanctions on U.S. products exported to Europe and provide tax relief that will create jobs.

"This legislation achieves a good balance by ending escalating sanctions on American products, offering manufacturing tax relief to spur job creation ... and leveling the playing field for U.S. businesses competing in the worldwide economy," he said.

The original purpose for the legislation was to repeal a $5 billion annual tax break provided to American exporters that was ruled illegal by the Geneva-based World Trade Organization. Repeal of the tax break was needed to lift retaliatory tariffs that are now being imposed on more than 1,600 American goods exported to Europe.

The bill replaces the $49.2 billion export tax break with $136 billion in new tax breaks over the next decade for a wide array of groups from farmers, fishermen and bow-and-arrow hunters to some of America's largest corporations.

The legislation also includes a $10.1 billion buyout of quotas held by tobacco farmers. However, a Senate provision that would have coupled this buyout with regulation of tobacco by the Food and Drug Administration was dropped by the conference committee that ironed out differences between the two chambers.

Some senators had threatened to filibuster the bill because of their unhappiness that House Republicans refused to accept the FDA regulation. But Senate leaders said they believed they would be able to take up the tax package in the Senate after House passage and expected to send it to the president either today or tomorrow before lawmakers adjourn to campaign.

In the House debate, Democrats said the Bush administration had moved to distance itself from the legislation, pointing to a letter Treasury Secretary John Snow wrote this week complaining about "a myriad of special interest tax provisions that benefit few taxpayers and increase the complexity of the tax code."

But White House spokesman Scott McClellan said yesterday the administration would support the bill that emerged from a House-Senate conference committee because the panel had addressed "many of the concerns that we had raised earlier."

Copyright © 2004 The Seattle Times Company

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