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Archive for Tuesday, October 12, 2004

Senate approves corporate tax breaks

Democrats criticize $136 billion relief bill as ‘huge giveaway’

October 12, 2004

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— The Senate shipped President Bush a wide-ranging $136 billion corporate tax-cut bill and a disaster aid package Monday, letting lawmakers head home for the finale of the presidential and congressional campaigns.

Florida, a vote-rich prize that both parties covet, will be chief beneficiary of the $14.5 billion disaster 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 electoral battleground states like Ohio and Wisconsin.

The tax bill, which the Senate approved 69-17, began as an effort to help U.S. exporters avoid European tariffs. But as Republican leaders hunted for votes, it swelled into the most profound rewrite of the corporate tax code in two decades.

President Bush is expected to sign the bill before Election Day.

The final 633-page product pared taxes for interests ranging from major manufacturers to native Alaskan whalers and ethanol producers. Other winners included fishing tackle box makers, NASCAR track owners, Chinese ceiling fan importers, and foreigners winning bets at U.S. horse and dog racing tracks.

"Let the record show this bill is fair, this bill is balanced," said Senate Finance Committee Chairman Charles Grassley, R-Iowa.

The White House has signaled that Bush will sign the legislation. But the administration kept a low profile as the bill progressed, underscoring the controversy enveloping some provisions.

The Senate adjourned for the elections in a testy mood, with the usual campaign-season partisan feelings heightened by clashes over items dropped from the compromise House-Senate tax measure.

Those battles, along with Republican divisions over how to pay for the farm disaster package, forced Congress to meet over the weekend and on the Columbus Day holiday. The House finished its work Saturday.

The Senate toiled into Monday as Democrats used delaying tactics to protest the removal of items from the original Senate version. These included provisions allowing federal regulation of tobacco, blocking Bush administration rules on overtime pay, and cutting taxes for companies that pay workers who are reservists and are called to active duty.

"The conferees chose ceiling fans over businesses saving jobs of our National Guard and reservists," said Sen. Christopher Dodd, D-Conn.

Kansas senators Sam Brownback and Pat Roberts, both Republicans, voted in favor of the new tax breaks.

In the end, the Senate approved separate bills on tobacco, overtime and reservists' pay. House passage seemed doubtful.

Though the tax bill would cut business taxes by $136 billion over the next decade, it claimed to raise an equal amount of revenue by increasing other taxes, including stricter rules governing the deduction for cars contributed to charities.

Supporters said the bill would create jobs -- the loss of which during the Bush administration has become a campaign issue. Sen. Max Baucus, D-Mont., who helped write the measure, said 200,000 U.S. manufacturing firms would benefit.

But opponents said the main beneficiaries would be well-connected special interests.

"What was supposed to be a quick and minor fix of the tax code blossomed into this huge giveaway of tax benefits," said Sen. Richard Durbin, D-Ill.

Grassley responded earlier in the debate to critics who said the measure had provisions for specific interests, saying, "Well, that's true. But that's how the Senate works."

Work on the tax bill began two years ago as a drive to repeal a $5 billion-a-year subsidy for U.S. exporters that the World Trade Organization ruled illegal. About 1,600 American exports to Europe were slapped with penalty tariffs rising 1 percent monthly to 12 percent now.

The legislation repealed that subsidy, which was to cost $49.2 billion over 10 years. Its other savings included nearly $82 billion from closing tax loopholes and corporate shelters.

In their place, taxes were cut for U.S. manufacturers by $76.5 billion. The top corporate tax rate was cut by 3 percent -- to 32 percent -- and qualifying businesses were expanded to include engineering and architectural firms, film and music companies, and the oil and gas industry.

Tax breaks for multinational companies totaled $42.6 billion, including lower rates for one year for companies returning overseas profits to the United States.

Opponents said that would reward companies that moved jobs overseas, but supporters said it would increase capital available for investments in the United States.

Residents of states without income taxes will be allowed to deduct state and local sales taxes from their federal income returns. There also is a $10.1 billion buyout of holders of quotas held by tobacco farmers, though a provision allowing the Food and Drug Administration to regulate tobacco was dropped.

The package of aid for farmers was attached to a $10 billion military construction bill, which the Senate approved by voice vote.

The Senate used another voice vote to send Bush a $33 billion measure financing the Department of Homeland Security. It included almost $900 million more than Bush proposed, but cut spending for emergency responders from last year's levels.

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