House passes massive overhaul of corporate tax laws, sends to Senate

Friday, October 8th 2004, 12:23 pm

By: News On 6

WASHINGTON (AP) _ The Senate is expected to follow the lead of the House and pass a major overhaul of corporate tax law that would dole out $136 billion in new tax breaks to a wide array of U.S. companies and provide a $10.1 billion buyout for the nation's tobacco farmers.

But Senate approval was being delayed until supporters of more regulation of tobacco can express their unhappiness that this provision was stripped from the bill.

Supporters of the corporate tax bill said Friday they have more than the 60 votes needed to end a filibuster and pass the bill, but they conceded that under Senate rules passage of the measure may not come until the weekend.

The House approved the corporate tax bill by a lopsided 280-141 vote late Thursday night with 73 Democrats joining 207 Republicans in support of the measure.

Senators who support regulation of tobacco by the Food and Drug Administration are unhappy that this provision was stripped out of the final bill by a House-Senate conference committee which did retain the buyout for farmers' Depression-era quotas.

The tax legislation represents the most sweeping rewrite of corporate tax law since the last major overhaul of the tax code in 1986.

The centerpiece of the legislation would provide $76.5 billion in tax relief for the country's beleaguered manufacturing sector and other U.S. ``producers'' _ broadly defined to include construction companies, architects, engineering firms, film and music companies and oil and gas companies.

Government watchdog groups said that expanded definition of manufacturing companies was just one example of what was wrong with a bill that they contend was stuffed full of tax breaks by lawmakers anxious to curry favor with different groups right before an election.

``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,'' complained Keith Ashdown of Taxpayers for Common Sense.

But House Ways and Means Chairman Bill 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.

The bill would repeal a $5 billion annual tax break provided to American exporters that was ruled illegal by the World Trade Organization. Ending the tax break is needed to lift retaliatory tariffs that have been imposed on U.S. exports 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. In addition to the $76.5 billion in tax relief for manufacturers and other producers, the bill would provide tax benefits to farmers, fishermen who purchase tackle boxes and sonar fish-finding equipment and bow-and-arrow hunters.

Residents of eight states that do not have a state income tax would get the ability to deduct their state and local sales tax payments from their federal income taxes. Tax help would also be provided to NASCAR race track owners, Native Alaskan whale hunters and importers of Chinese ceiling fans.

Opponents also objected to $42.6 billion in tax relief for multinational corporations, which they contended would increase the movement of U.S. jobs overseas.

``It's Christmas in October for multinational companies and lobbyists with friends in high places,'' said Rep. Charles Rangel of New York, the top Democrat on the House Ways and Means Committee.

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.''

But White House spokesman Scott McClellan said Thursday the administration would support the current version of the tax bill because ``many of the concerns that we had raised earlier'' had been addressed.

Supporters said all of the $136 billion in tax breaks are paid for by $136 billion in revenue raising measures, including $82 billion that will be raised by closing various tax loopholes and corporate tax shelters.

However, charities expressed unhappiness that $2.4 billion of that amount would be raised by tightening the requirements for obtaining a tax deduction for donating a car to charity.