House passes corporate tax overhaul

WASHINGTON – The House on Thursday passed the most sweeping rewrite of corporate tax law in nearly two decades, a measure designed to end a nasty trade war with Europe and shower $136 billion in new tax breaks on businesses, farmers and other groups.

The measure was approved on a 280-141 vote, sending it to the Senate, where leaders predicted quick approval but some Democrats threatened a filibuster.

Supporters argued that the centerpiece of the legislation – tax relief for American factories – was critically needed to aid beleaguered manufacturers who have suffered 2.7 million lost jobs over the past four years.

But opponents charged that the tax package had grown into a massive giveaway that will add to the complexity of the tax system and end up rewarding multinational companies that move jobs overseas.

“It’s Christmas in October for multinational companies and lobbyists with friends in high places,” said Rep. Charles Rangel, D-N.Y.

“But if you are a worker concerned about manufacturing jobs moving overseas, it’s still the season for Halloween horrors.”

But House Ways and Means Chairman William Thomas, R-Calif., argued that the legislation was urgently needed to “end sanctions on U.S. products and provide tax relief to America’s job creators.”

The original purpose for the legislation was to repeal a $5 billion annual tax break provided to American exporters that was ruled illegal by the Geneva-based World Trade Organization.

Repeal of the tax break was needed to lift retaliatory tariffs that are now being imposed on more than 1,600 American manufactured products and farm goods exported to Europe.

The bill replaces the $49.2 billion export tax break with $136 billion in new tax breaks over the next decade for a wide array of groups from farmers, fishermen and bow and arrow hunters to some of America’s largest corporations.

The legislation also includes a $10.1 billion buyout of quotas held by tobacco farmers.

However, a Senate provision that would have coupled this buyout with regulation of tobacco by the Food and Drug Administration was dropped by the conference committee that ironed out differences between the two chambers.

Some senators had threatened to filibuster the bill because of their unhappiness that House Republicans refused to accept the FDA regulation.

But Senate leaders hope to send it to the president either today or Saturday before lawmakers adjourn to campaign.

In the House debate, Democrats said the Bush administration had moved to distance itself from the legislation, pointing to a letter Treasury Secretary John Snow wrote this week complaining about “a myriad of special interest tax provisions that benefit few taxpayers and increase the complexity of the tax code.”

But White House spokesman Scott McClellan said Thursday the administration would support the bill that emerged from a House-Senate conference committee because the panel had addressed “many of the concerns that we had raised earlier.”

The major new tax break would provide $76.5 billion in relief over 10 years to manufacturers and other U.S. producers, broadly defined to include construction companies, architectural firms, film and music producers and the oil and gas industry.

Opponents argued that the oil and gas industry, which is enjoying record prices for their products, should not be included in a bill that was intended to encourage American manufacturers to keep their factories in the United States and not move them overseas.