Budget Special Report
Navigation Bar
Navigation Bar

THE BUDGET
 Overview
 Key Stories
 Opinion
 Game
 Glossary
 Links &
 Resources
 Talk
 Special
 Reports

  blue line
Tax Bill's Breaks Out in the Open

The Budget

From the Post
  • Clinton, Hill Leaders Agree on Budget Goals (July 13)

  • GOP Debates Prospects for Tax Cut (July 2)

  • House GOP to Seek Bigger Tax Cut (July 1)

  • Budget Surplus Forecast Grows (June 29)


  • By Dan Morgan
    Washington Post Staff Writer
    Wednesday, July 14, 1999; Page A21

    In years past, breaks for corporations have often been hidden in the fine print of major tax legislation to avoid easy detection, like candy at an Easter egg hunt.

    That wasn't the way House Ways and Means Committee Chairman Bill Archer (R-Tex.) did it yesterday when he unveiled a far-reaching tax measure that boldly--and unabashedly--allocates billions of dollars of tax savings to defense contractors, multinational banks, steel companies, oil and gas developers, insurance companies and timber giants over the next 10 years.

    Just about everything, from the proposed repeal of the excise tax on fishing tackle boxes to a provision putting weapons manufacturers on the same tax footing as other exporters, is right out in the open in the bill, which is more than 500 pages long.

    One whole title of the bill is devoted to providing relief to U.S. multinational companies competing on the often-bumpy playing field of the global economy.

    A single provision, which will enable American multinationals to increase the foreign tax credits they take on their U.S. tax returns--through a complicated reallocation of their interest deductions--would cost the Treasury an estimated $25 billion in lost revenue over 10 years.

    "In terms of corporate tax relief, the vein of gold is in the international provisions," said Lawrence O'Brien of the Washington lobby shop O'Brien Calio.

    The National Foreign Trade Council, which represents hundreds of multinationals, lobbied hard for the foreign tax credit provision. Also shepherding it was Price Waterhouse lobbyist Kenneth Kies, a longtime Archer confidant who served as chief of staff of the Joint Committee on Taxation until early 1998.

    Kies said a number of Price Waterhouse clients, including General Motors Corp., sought the provision. "This bill moves in the direction of parity [with foreign countries] in the way we treat multinational companies," said Kies.

    He predicted that there would be considerable Democratic support for efforts to reshape tax laws to keep U.S.-based global companies from moving their headquarters to more favorable tax climates abroad.

    But the bill also includes a provision that President Clinton once vetoed. It would extend for five years the ability of U.S. banks, insurance companies and securities firms to defer paying taxes on profits from foreign sales until those profits are brought home.

    Clinton used his newly acquired line-item veto authority to strike that concession from a 1997 tax bill. But after the Supreme Court ruled the line-item veto unconstitutional, a revised version of the provision was reinstated.

    Treasury officials have argued against treating financial services companies in the same way as manufacturers because of the special ease with which they can move money between countries to exploit tax loopholes and advantages.

    But extending the provision would save the industry about $1 billion a year in taxes, according to congressional estimates.

    Defense industry lobbyists were jubilant yesterday that Archer's bill would allow military equipment exporters to exclude 15 percent of their income from taxation--the same as nondefense exporters.

    Congress in 1976 reduced the exemption to half of what other exporters got, on the grounds that defense exports at the time were already heavily subsidized by the U.S. government.

    But a "Coalition for Fairness in Defense Exports," made up of 12 industry groups, along with major defense contractors, argues that European, Russian and Asian competitors now have an advantage.

    Northrop Grumman Corp. and Lockheed Martin Corp. lobbied actively for the change, sources said. But some defense companies reportedly are worried that the provision could escalate a dispute with the European Community, which recently filed a complaint with the World Trade Organization over the 15 percent U.S. exclusion.

    "It's a gargantuan bill, but what you see is what you get," said O'Brien, a former Treasury official in the Carter administration. "They touched a lot of thematic issues here in terms of a Republican tax agenda."

    That included gestures toward multinational companies and small businesses--both central to GOP fund-raising and election support.

    The easing of estate taxes--a key reform in the Archer bill--has long been a major goal of the National Federation of Independent Businesses, a valued GOP constituency. At the same time, several sources noted, the Archer bill does not extend the tax credit for the development of wind and biomass power production--alternative energy sources with a constituency in the environmental movement and the Democratic Party.


    © 1999 The Washington Post Company

    Back to the top


    Navigation Bar
    Navigation Bar
     
    yellow pages