Big corporate-tax bill clears Congress

By Jonathan Weisman
The Washington Post

"Bill is fair," says Iowa Sen. Charles Grassley

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WASHINGTON — The Senate gave final approval yesterday to the most significant corporate-tax legislation in nearly 20 years, sending to President Bush a sprawling, 650-page measure that closes egregious tax loopholes, reduces taxes for domestic producers and doles out scores of tax breaks for interests ranging from tackle-box makers to Native Alaskan whaling captains.

The Senate vote of 69-17 belied the acrimony underlying the measure, which includes $143 billion in tax breaks over 10 years, offset by loophole closures and other revenue raisers. Both of Washington state's senators voted for the bill.

The House passed it Thursday night by a similarly comfortable margin, 280-141, and Bush is expected to sign it into law.

The vote cleared the way for Congress to adjourn for the rest of the campaign season. After the bill passed, the Senate quickly approved spending measures to fund homeland security and military construction for the fiscal year that began Oct. 1.

Congress will return after the Nov. 2 election to pass most of the spending bills that will finance the government this fiscal year, while it grapples with legislation to overhaul the nation's intelligence programs.

Adjournment had been held up for days by legislative brushfires over the tax bill.

Top tax breaks Key provisions of the corporate tax bill approved by the Senate and sent to President Bush. The cost estimates over 10 years come from the congressional Joint Committee on Taxation: • Repeals tax breaks for American exporters, such as Boeing and Microsoft, that the World Trade Organization found violated global trade rules. The export subsidy reduced taxes on goods manufactured in the U.S. and exported overseas by as much as 8 percentage points to help American companies compete with foreign rivals. Savings: $49.2 billion. • Closes a variety of corporate loopholes and tax shelters. One of the provisions to save $2.4 billion would limit the amount that can be written off by donating a car. Total savings: $81.7 billion. • Cuts taxes for manufacturers and other domestic producers, a category that includes 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. • Revises 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. • Reduces excise taxes on the sale of bows and arrows, fishing-tackle boxes and sonar fish finders. Cost: $24 million. The Associated Press and Gannett News Service

Proponents hailed it as a jobs-creation measure that would simplify the nation's Byzantine tax laws for multinational corporations, address long-fest-

ering grievances and clamp down on loopholes, such as one that allows companies to escape taxation by reincorporating at a post-office box in an offshore tax haven.

"This bill is basically about manufacturing jobs," said Senate Finance Committee Chairman Charles Grassley, R-Iowa. "Let the record be clear: This bill is fair. This bill is balanced."

But critics — including budget watchdogs, liberal activists and Treasury Secretary John Snow — decried what they saw as a cornucopia of special-interest tax cuts that would complicate the tax code, favor companies doing business overseas and ultimately worsen the budget deficit.

Sen. John McCain, R-Ariz., pronounced it "disgraceful" and "a classic example of the special interests prevailing over the people's interest."

Public-health groups were infuriated that a $10 billion buyout for tobacco farmers was included without a provision to grant the Food and Drug Administration authority to regulate tobacco products.

Charities protested a revenue-raising measure that would greatly reduce the value of automobiles donated to them.

"Congress is turning its back on the very service organizations it claims to support through faith-based and community initiatives, while providing billions of dollars in new tax breaks to wealthy corporations," said Ron Field, vice president of public policy for Volunteers of America.

But threatened filibusters over the tobacco provision and the failure to include a tax break for employers of National Guardsman and reservists fizzled.

Sen. Mary Landrieu, D-La., agreed to a final vote after Senate leaders attached her $2.5 billion guard-and-reserve tax break to a different bill. Sen. Mike DeWine, R-Ohio, dropped his threat over the tobacco provision when he was promised a separate vote on an FDA regulation bill.

The tax legislation culminates a two-year effort to repeal an export subsidy ruled illegal by the World Trade Organization. That ruling allowed the European Union to impose sanctions last spring that currently tack 12 percent onto the cost of a variety of U.S. exports.

But wary of raising taxes on the nation's ailing manufacturing sector, Congress hoped to replace that $5 billion-a-year subsidy with tax cuts to ease the pain.

The centerpiece tax cut — worth $76.5 billion over 10 years — provides tax deductions that would effectively lower the corporate income-tax rate from 35 percent to 32 percent for U.S. "producers," defined broadly to include traditional manufacturers, Hollywood studios, architectural and engineering firms, home builders and oil and gas drillers, among others.

Also included are $42.6 billion worth of tax cuts for overseas profits, including a 10-year, $3.3 billion temporary tax holiday allowing companies with vast stores of offshore revenues to bring them home under a discount tax rate of 5.25 percent.

Beyond those centerpieces are hundreds of smaller measures that benefit restaurant owners and Hollywood producers; makers of bows, arrows and sonar fish finders; NASCAR track owners; and importers of Chinese ceiling fans.

Under the bill, foreign gamblers would no longer have to report their dog-track and horse-track winnings for taxation. Native Alaskan whaling captains could deduct some expenses as charitable contributions.

Small oil and gas drillers, already buoyed by record fuel prices, would get new tax breaks for marginal wells. Railroads would garner a special credit for maintaining their tracks.

"On issue after issue, page after page, [the bill] puts the interest of the big corporations above the public interests, above the hopes and dreams and every day needs of the American middle class," said Sen. Ted Kennedy, D-Mass..

Grassley accused such critics of grandstanding, since he said virtually every senator had approached him for a pet tax break.

"Nearly every member raised narrow interest provisions," he said. "So if there's some fault, we all share it. We all do it."

The Senate also passed a $14.5 billion disaster-aid package yesterday. Florida, a vote-rich prize that both parties covet, will be chief beneficiary of the measure as the state rebuilds from a battering by four recent hurricanes.

Included is $2.9 billion for farmers beset by drought, floods or other emergencies, with some money headed to other closely contested states such as Ohio and Wisconsin.

Information on the disaster-aid bill was provided by The Associated Press.

Copyright © 2004 The Seattle Times Company

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