House Passes Huge Corporate Tax Overhaul
NewsMax Wires
Friday, Oct. 8, 2004

http://www.newsmax.com/archives/articles/2004/10/7/221016.shtml

WASHINGTON -- The House on Thursday passed the most sweeping rewrite of
corporate tax law in nearly two decades, a measure designed to end a nasty
trade war with Europe and shower $136 billion in new tax breaks on
businesses, farmers and other groups.

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
American 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."

But House Ways and Means Chairman William Thomas, R-Calif., argued that
the
legislation was urgently needed to "end sanctions on U.S. products and
provide tax relief to America's job creators."

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 manufactured products and farm 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 on Friday or Saturday 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 Thursday 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."

The major new tax break would provide $76.5 billion in relief over 10
years
to manufacturers and other U.S. producers, broadly defined to include
construction companies, architectural firms, film and music producers and
the oil and gas industry.

Opponents argued that the oil and gas industry, which is enjoying record
prices for their products, should not be included in a bill that was
intended to encourage American manufacturers to keep their factories in
the
United States and not move them overseas.

Another controversial section of the bill would provide $42.6 billion in
tax
relief to multinational companies, including providing a "tax holiday"
that
would lower for one year the tax rate on companies returning their
overseas
profits to the United States.

Supporters argued that this would boost the amount of capital available
for
investment in the United States while opponents charged it represented a
windfall for companies that had already moved operations overseas.

The overall bill would not increase the deficit, according to the
projections of the Joint Tax Committee, because the $136 billion in tax
cuts
were balanced by $136 billion in tax increases. But Democrats charged that
the true costs of the tax cuts would be nearly $80 billion higher because
Republicans used accounting gimmicks such as having popular provisions
expire after a few years.

The closing of tax loopholes and corporate tax shelters represented $82
billion of the projected revenue increase over the next decade. One of
those
provisions, tightening the deduction rules for donating cars to charities,
would raise $2.4 billion over 10 years.

Senate Finance Committee Chairman Charles Grassley, R-Iowa, and Sen. Max
Baucus, D-Mont., were the driving forces behind many of the
loophole-closing
provisions.