The House, by a vote of 280 to 141, gave final approval last night to a far-reaching tax bill that would provide a rich array of breaks to manufacturing companies, energy producers and small businesses and would underwrite a $10 billion buyout of American tobacco farmers over the next decade.
The bill is aimed at ending a transatlantic trade war by scrapping certain tax subsidies for U.S. exporters that have brought on retaliatory action by Europe. But in the version approved last night by the House, that modest goal is largely overwhelmed in a preelection package of benefits for dozens of constituencies, including NASCAR track owners and mall builders.
The measure, which would provide nearly $150 billion in concessions but claims to offset nearly half that amount with new revenue, goes to the Senate. Speedy approval there is considered likely.
The bipartisan momentum, however, masked the bitter disappointment of health advocates and labor organizations, which saw their hopes for major legislative gains evaporate during final House-Senate negotiations in which pro-business House Republicans were able to assert their will.
The compromise measure approved last night does not include a Senate-approved plan that, for the first time, would have given the Food and Drug Administration authority to regulate the cigarette industry. Also deleted was a provision in the Senate-passed version of the tax bill that would have blocked a portion of the Bush administration's controversial new overtime pay eligibility rules.
Democrats charged that the bill would do little to create jobs or enhance the competitiveness of U.S. industry, as Republicans claim.
Senate backers of the FDA regulation of cigarettes indicated last night that they had not abandoned hope of defeating the gigantic tax bill.
Sen. Mike DeWine (R-Ohio) said earlier this week that a bill without the FDA regulation of cigarettes would pass "over my dead body." A spokesman for Sen. Edward M. Kennedy (D-Mass.), another strong supporter of FDA regulation, said last night that the senator was "considering all the parliamentary tools available to him to defeat the bill."
But the sheer diversity of the bill's benefits -- which would go to economically strapped manufacturing companies, timber operations, oil and gas wildcatters, and new industries that make diesel fuel from soybeans -- will make it difficult for opponents to muster the 60 votes in the Senate needed to block action.
Senate Minority Leader Thomas A. Daschle (D-S.D.), who is in a tight race to retain his seat in November, has indicated that he supports the compromise bill. Daschle lobbied for new tax breaks for small producers of ethanol fuel, a budding business in his state.
Both parties are hoping to exploit the tobacco buyout provisions.
On Wednesday, Democrat Erskine B. Bowles, who is in a fierce battle for one of North Carolina's Senate seats, canceled his campaigning and rushed to Washington to urge senators to vote for the tax bill even without the FDA regulation of tobacco.
The bill would channel about $4 billion to North Carolina tobacco farmers over 10 years. It would phase out the New Deal-era system of government quotas that is threatening to bankrupt tobacco farmers faced with slackening demand and falling prices.
Under the buyout provisions, farmers would get a transitional payment, enabling them to retire, switch to new crops or modernize their tobacco production to meet the demands of a competitive market.
On the House floor last night, Ways and Means Committee Chairman Bill Thomas (R-Calif.) described Bowles's Republican opponent, Rep. Richard Burr (N.C.), as one of the chief architects of the tobacco buyout provisions.
Taking the floor, Burr then called it "a special night" for tobacco farmers and said: "This piece of legislation will probably enable 10,000 individuals in North Carolina alone" to avoid having "to file for bankruptcy this year."
Other parts of the bill were clearly crafted with an eye to the coming election. Republicans, for example, would like to take credit for helping middle-class voters in seven states that do not have a state income tax. The bill would restore a provision of the tax code that allows the deduction of state sales taxes in lieu of deducting state income taxes.
Meanwhile, Democrats charged that the bill is far too generous to big companies. "It's Christmas in October for multinational companies and lobbyists with friends in high places," said Charles B. Rangel (N.Y.), ranking Democrat on the Ways and Means Committee.
Minority Whip Steny H. Hoyer (D-Md.) said the bill "only serves to complicate and carve up the tax code. . . . It continues [on] the path of extraordinary fiscal irresponsibility."
From modest beginnings, the tax bill grew steadily.
The original impetus was a World Trade Organization ruling nearly two years ago that declared $5 billion in annual U.S. export subsidies to U.S. manufacturers to be illegal.
That ruling prompted the European Union to impose retaliatory tariffs on 1,600 U.S. manufactured products and farm goods. The tariffs, now at 12 percent, rise each month the illegal export subsidies continue.
The bill would phase out the export subsidies deemed illegal by the WTO. But it is still unclear whether this would take place fast enough to satisfy the Europeans and result in the lifting of the tariffs.