Tax

Tax Cut Weighs In at $145 Billion

To offset the loss of $50 billion considered to be illegal export subsidies by the World Trade Organization, Congress is ready to dole out nearly t...
Stephen TaubOctober 8, 2004

Congress is expected to finalize $145 billion in tax breaks before adjourning until after the November elections — possibly today — according to press reports. The Senate may delay action until the weekend, according to the Associated Press, if an anticipated filibuster is mounted by anti-tobacco senators.

The intent of the bill, approved by a Senate-House conference committee on Wednesday, is to abolish $50 billion in tax breaks that were ruled an illegal export subsidy by the World Trade Organization. But in freeing American exports to Europe from stiff penalty tariffs, Congress is ready to dole out nearly three times that amount to U.S. corporations.

The largest tax break — valued at $76.5 billion over 10 years — is intended to help the manufacturing sector, which has lost 2.7 million jobs over the past four years, according to the Associated Press. The wire service noted, however, that “manufacturing” is broadly defined to include construction companies, engineering and architectural firms, and movie and recording studios. The New York Times reported that at the behest of Starbucks, coffee roasting (but not coffee preparation) would also be considered manufacturing.

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What’s more, the bill “will allow America’s largest energy companies — which are among the most profitable in the U.S. economy — to reclassify energy production as a manufactured good,” asserted Joan Claybrook, president of consumer advocacy group Public Citizen, in a statement.

“The energy industry has successfully pressured Congress for a heap of pork on a corporate tax bill,” she said, according to the AP.

The 633-page bill features 276 separate provisions, reported the Washington Post, including tax breaks for Alaskan whalers, NASCAR track owners, importers of Chinese ceiling fans, and gamblers from overseas. Other provisions, according to the Associated Press, would reduce excise taxes on the sale of bows and arrows, fishing-tackle boxes, and sonar fish finders.

General Electric Co. would receive hundreds of millions of dollars in benefits from a 10-year, $7.9 billion provision that would simplify how U.S. taxes are calculated on overseas profits, the Post pointed out. A related 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.

The most controversial tax break approved by the conference committee is likely the $10.1 billion in payments to tobacco farmers, related to a quota system that governs how much tobacco can be grown each year, noted the AP. The preliminary plan omits a Senate proposal that would link the tobacco buyout to regulation of the industry by the Food and Drug Administration. “What the conferees have done is remove the lynchpin in the passage of this legislation in a complete sellout to the tobacco companies,” said Sen. John McCain (R-Ariz.), according to the wire service.

If the FDA provision is not included, added the AP, several senators are threatening a filibuster to block final passage of the legislation.

The Times reported that new customs duties, tighter enforcement of fuel taxes for aircraft and heavy equipment, and the abolishment of several major tax shelters would raise about $50 billion over the next 10 years to help pay for the pending legislation. House Republicans blocked a series of Senate proposals, added the paper, that would have enabled the Internal Revenue Service to get tougher on tax shelters and to raise another $40 billion.

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