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Corporate tax bill bogs down in Senate

SATURDAY, OCT. 9, 2004

WASHINGTON – The drive to pass a $136 billion corporate tax bill hit a roadblock in the Senate on Friday when lawmakers upset about tobacco regulation, new overtime rules and combat pay employed delaying tactics to prevent a vote.

However, a deal was reached late Friday to schedule a vote on the legislation on Sunday. Supporters confidently predicted passage.

In an agreement Democrats reached with Republican leaders, the Senate will also cast two mainly symbolic votes on giving the Food and Drug Administration the power to regulate tobacco and on blocking new overtime rules the Bush administration put into effect in August.

Sen. Edward Kennedy, D-Mass., who led opponents in the delaying tactics, claimed victory with the agreement even though the measures will not be taken up by the House before lawmakers adjourn to campaign for re-election.

“We made real progress tonight in the fight to once and for all stop big tobacco from marketing cigarettes to our children,” Kennedy said in a statement.

While the House has rejected FDA regulation of tobacco, Kennedy said he would keep pushing the issue in an upcoming special session expected later this year and in next year’s regular session of a new Congress.

The House approved the corporate tax bill 280-141 Thursday night with 73 Democrats supporting the bill. Democratic support in the Senate is also expected to be substantial, given that the measure is chock-full of tax breaks designed to appeal to a wide array of interests.

But senators who support the regulation of tobacco by the FDA were unhappy that this provision was stripped out of the tax measure by a House-Senate conference committee which did retain a $10.1 billion buyout for tobacco farmers’ Depression-era quotas.

During floor debate Friday, Kennedy complained that House Republicans on the conference committee had insisted the FDA tobacco provision be stripped away.

Regulation is needed to help keep children from becoming addicted to cigarettes, Kennedy argued. The bill “should have provided protection of America’s children but the Republican leadership refused to do that.”

Senators were also upset about the removal of two other Senate provisions – blocking implementation of overtime rules that opponents contend will deny millions of Americans overtime pay and providing a tax credit to companies that make up the lost pay of employees who are called up to serve in the National Guard or military reserve units.

Sen. Mary Landrieu, D-La., said the employer credit for bridging the gap between what workers earn in the military and what they earn in their civilian jobs would have cost $2 billion in a tax bill that included $136 billion in tax breaks for such interests as NASCAR race track owners, importers of Chinese ceiling fans and some of the largest corporations in America.

“How can I go home and say I am sorry that we didn’t have any money to hand out to our guard and our reserve,” she asked.

The centerpiece of the tax legislation pending before the Senate 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.

The bill would also 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 that now stand at 12 percent and are rising by 1 percentage point a month.

The bill replaces the export tax break with $136 billion in new tax relief over the next decade for a wide array of groups from small businesses to farmers and fishermen.

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.

Opponents also have objected to $42.6 billion in tax relief for multinational corporations, which they contended would increase the movement of U.S. jobs overseas but supporters say will make U.S. multinational companies more competitive.

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.


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