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.
Senate Minority Leader Thomas A. Daschle (D-S.D.) is said to have been won over by the tax bill's provisions for agriculture, particularly for ethanol producers.
(Lucian Perkins -- The Washington Post)
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.