- The Washington Times - Saturday, September 14, 2002

The release yesterday of a lengthy list of U.S. products targeted for sanctions by the European Union could provide a spark for efforts in Congress to repeal corporate tax laws ruled an illegal subsidy, a key lawmaker says.
"There was a lot of hope that this would go away," said Rep. Bill Thomas, California Republican and chairman of the tax-writing House Ways and Means Committee. "We now know the hard, cold facts."
The $4 billion in sanctions were authorized last month by the World Trade Organization, which ruled that the United States gave illegal tax breaks to its companies that operate abroad. The list published yesterday includes a wide range of products, including asparagus, pepports, which would increase their costs abroad, are expected immediately. EU officials have given repeated assurances that the United States will have time to bring its tax laws into compliance before starting what would be the biggest trade war in history.
Legislation sponsored by Mr. Thomas to make more than 20 changes in the tax laws in question has been sharply criticized since it was introduced in July. Some large exporting companies, notably Boeing Co. and Eastman Kodak Co., have argued that it will cost them billions of dollars, might lead to layoffs and could encourage more corporations to move operations overseas.
Republicans and Democrats have expressed skepticism, particularly those representing the companies and economic sectors most affected. Mr. Thomas said yesterday that the EU sanctions list will make clear to all these critics that neither the tax breaks nor a slight modification will survive WTO scrutiny.
"We can't go back to an illegal subsidy. It's over," Mr. Thomas said.
The top Democrat on the Ways and Means Committee, Rep. Charles B. Rangel of New York, said efforts should focus on a bipartisan solution that includes ideas from the Democratic-led Senate and the Bush administration, as well as renewed emphasis on a negotiated settlement.
"In sum, I want to make clear that no one should use the threat of retaliation or any possible confusion generated by the EU draft list as a pretext to press a partisan agenda," Mr. Rangel said in a letter to Democratic lawmakers. "We have already seen the failure of one plan, because it was developed by a small group of legislators with no bipartisan input."
Mr. Thomas released two letters yesterday that bolster his case, including a formal expression of support for his bill from the Treasury Department.
Pam Olson, the acting assistant Treasury secretary for tax policy, said in her letter that an alternative suggested by industry groups would not pass WTO muster and that the Thomas bill "would satisfy the dual goals" of meeting those obligations while aligning U.S. corporate tax laws more closely with those of other countries.
"We should be moving in the direction of simplifying our international tax rules, not further complicating them," Ms. Olson wrote.
The other letter of support was from the International Tax Working Group, which includes U.S.-based multinational firms such as Wal-Mart Stores Inc., Coca-Cola Co., General Motors Corp., Exxon Mobil Corp., Texas Instruments Inc. and Johnson & Johnson.
In this election year, Mr. Thomas said it was unlikely Congress could complete action on such a complicated bill before adjourning in the fall. But he believes lawmakers could be ready to move quickly once the new Congress convenes in January.
Besides overhauling the corporate tax laws, the Thomas bill would curb tax shelters and attempt to halt relocation of U.S. corporate headquarters to Bermuda and other tax havens. These measures would raise money to so that the new tax laws cause less pain for companies losing their old tax breaks measures that could be taken by other lawmakers to raise revenue for other programs.
"If there is a clock, it is already ticking," Mr. Thomas said.

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