Homestead mailing list

[Tvoivozhd <tvoivozd AT infionline.net>]

*washingtonpost.com* <http://www.washingtonpost.com/>
*Conferees Agree on Corporate Tax Bill*

By Jonathan Weisman
Washington Post Staff Writer
Thursday, October 7, 2004; Page A05

House and Senate negotiators agreed yesterday on an ambitious corporate 
tax bill that would shower billions of dollars in tax breaks on 
beneficiaries from old-line manufacturers to Alaskan whalers to gamblers 
from overseas -- and includes a controversial $10 billion buyout of the 
nation's tobacco farmers.

The bill could be taken up by the full House as soon as today and 
passage is expected. Opponents could filibuster in the Senate over the 
tobacco farmer buyout, but Senate Majority Leader Bill Frist (R-Tenn.) 
expressed confidence that the bill will be sent to the White House 
before Congress adjourns for the final weeks of the campaign.

White House spokeswoman Claire Buchan said last night that Congress had 
addressed enough of the administration's concerns to win President 
Bush's support. The legislation would "promote the competitiveness of 
U.S. manufacturers . . . and help create American jobs," she said.

The legislation culminates more than two years of efforts to repeal a $5 
billion-a-year export subsidy that was ruled illegal by the World Trade 
Organization. The European Union imposed punitive tariffs on a variety 
of U.S. products in response to the WTO ruling, and manufacturers 
lobbied Congress to replace the export subsidy with equivalent tax 
breaks acceptable under international trading rules.

But that modest aim grew into a 633-page bill that would extend about 
$150 billion in tax breaks over the coming decade. The bill's 276 
separate provisions benefit restaurant owners and Hollywood producers; 
makers of bows, arrows, tackle boxes and sonar fish finders; NASCAR 
track owners; native Alaskan whalers; and even importers of Chinese 
ceiling fans. The central provision, worth about $76.5 billion over the 
next decade, would effectively lower the tax rate on corporate profits 
from 35 percent to 32 percent for all domestic producers -- a broadly 
defined term that includes such activities as traditional manufacturing, 
architectural design and filmmaking.

General Electric Co. would benefit by hundreds of millions of dollars 
from a 10-year, $7.9 billion provision that would simplify how U.S. 
taxes are calculated on overseas profits. Another provision would grant 
companies with substantial overseas earnings a temporary tax holiday, 
during which they could bring those profits home at a discounted tax 
rate of 5.25 percent. That measure was pushed hard by high-technology 
lobbyists but criticized by Treasury Secretary John W. Snow as 
discriminating against companies that don't have large overseas operations.

The bill would allow NASCAR track owners to write off $101 million worth 
of improvements over 10 years, while Home Depot Inc. would secure a 
temporary suspension of tariffs it owes for imported Chinese ceiling 
fans. Supporters argued that the measure would help lower electricity 
costs by encouraging homeowners to turn off their air conditioning.

Foreign gamblers at U.S. horse- and dog-racing tracks would no longer 
have to pay taxes on their winnings upfront. Taxes on such winnings now 
can be reclaimed, but the paperwork often is not filed. Financial 
backers of native Alaskan whalers, meanwhile, would be able to claim 
their contributions as a charitable tax deduction.

For some industries, the bill ultimately would be a liability. Hollywood 
would get a $336 million tax break for domestic film and television 
production, and studios would be eligible for the lower tax on profits. 
But the repeal of the export subsidy would cost them an estimated $6 
billion over the next decade.

The cost of the bill is to be offset by closing tax loopholes and by 
other revenue-raising measures. For example, the bill would clamp down 
on companies that move their headquarters to post office boxes in 
offshore tax havens and would close a loophole that allows 
small-business people to deduct up to $100,000 of the cost of luxury 
sport-utility vehicles on their income tax returns.

The legislation has been fiercely criticized by budget watchdogs, 
liberal advocacy groups and the Bush administration, all of which have 
decried it as a grab bag of special-interest measures that would further 
complicate the tax code and increase the budget deficit.

"This is a very cynical conclusion to this Congress," said the 
nonpartisan Concord Coalition's executive director, Robert L. Bixby, who 
suggested that the money raised by closing tax loopholes would be better 
used to reduce the federal deficit, or to underwrite broader provisions 
like the middle-class tax cuts President Bush signed this week. The WTO 
ruling against the export subsidy was "a legitimate problem they needed 
to address, and they used that legitimate problem to drag all these 
goodies over the finish line," Bixby said.

Advocates said the compromise reached yesterday will provide timely tax 
relief for companies that have been slow to hire new workers. "The 
conference report will end [E.U.] sanctions on U.S. products and provide 
tax relief to America's job creators," said Rep. Bill Thomas (R-Calif.).

But E.U. spokesman Anthony Gooch strongly hinted that the legislation 
may not even accomplish its central goal: lifting the European 
sanctions. The export subsidy phases out of existence slowly when it 
should be lifted immediately, he said, and a developing trade dispute 
over subsidies to aircraft manufacturers Boeing Co. and Airbus SAS could 
complicate any move to lift the penalties.

The most vociferous criticism has centered on the $10 billion buyout of 
tobacco growers. Some lawmakers complained that the legislation upends a 
delicate congressional compromise linking the buyout to a measure 
granting the Food and Drug Administration authority to regulate tobacco. 
Though the buyout was approved by the conference committee, the stiffer 
regulation of tobacco was not -- which the American Lung Association 
decried as "unconscionable." Sen. Mike DeWine (R-Ohio) had threatened a 
filibuster if the FDA provision was excluded, but that prospect appeared 
to dim yesterday.

Republican and Democratic lawmakers and tax aides said the final bill 
would help such a broad variety of businesses, it will win congressional 
approval. Business and manufacturing groups are pushing hard for final 
passage so exporters can be relieved of the mounting E.U. sanctions, 
which are now 12 percent. Western lawmakers touted the bill's benefits 
for oil and gas drillers. Tobacco-state lawmakers crowed about the 
buyout for farmers.

"This is a good deal for our tobacco farmers and a historic time for 
Kentucky agriculture," said Sen. Jim Bunning (R-Ky.).

Politicians from states without income taxes, especially Texans, praised 
the two-year measure allowing their constituents to deduct their sales 
taxes on their federal return, a provision championed by House Majority 
Leader Tom DeLay (R-Texas). "This is a huge economic boost for Texas," 
said Rep. Kevin Brady (R-Texas).

Democratic tax aides said Senate Minority Leader Thomas A. Daschle 
(D-S.D.) was won over by lucrative agriculture provisions, especially 
tax benefits for ethanol producers. "There are a lot of things in this 
bill that are very popular with senators of both parties," said Senate 
Majority Whip Mitch McConnell (R-Ky.). "Killing the conference report 
over the fact that something isn't in it is highly unlikely."

© 2004 The Washington Post Company