- The Washington Times - Wednesday, October 22, 2003

House lawmakers on Tuesday plan to consider a major rewrite of the corporate tax code that would repeal $50 billion in export subsidies, redistribute the funds and could add $60 billion to the deficit.

Legislators are working to repeal and reapportion tax breaks worth $50 billion over 10 years after a World Trade Organization ruling that the breaks, given to U.S. exporters, are illegal. The decision sparked a threat of $4 billion in trade sanctions from the European Union, which had brought the WTO case.

The 15-nation European Union has demanded that Congress complete the legislative process this year, and the threat of sanctions spurred several proposals for a solution and intense lobbying among companies.

“Since January, some of the country’s largest campaign contributors have formed four competing coalitions to lobby the lawmakers crafting the tax legislation. Combined, these interests spent close to $1 million lobbying Congress in the first half of the year,” the Center for Responsive Politics, a Washington watchdog group, said in a report released yesterday.

The House Ways and Means Committee is scheduled Tuesday to mark up a bill that includes some corporate requests.

The measure is meant to prevent the sanctions, help an ailing manufacturing sector and make multinational corporations more competitive in the world market, according to Rep. Bill Thomas, California Republican and bill sponsor.

In addition to redistributing $50 billion, the bill, which is not finalized, adds new tax breaks that would cost $60 billion over 10 years, according to a committee source. Mr. Thomas’ original proposal included about $128 billion in new corporate tax cuts, but the figure proved unpalatable because of record budget deficits.

The bill may yet be revised before the hearing, and no revenue tables have been released.

Reps. Philip M. Crane, Illinois Republican, and Charles B. Rangel, New York Democrat, offered a competing bill that would effectively cut taxes for domestic manufacturers. House leadership favored the approach, and Mr. Thomas reportedly tailored his bill to incorporate some of the provisions.

Crane spokeswoman Sara Perkins said her boss is“pleased that Thomas has incorporated many of the provisions from the Crane-Rangel bill to aid domestic manufacturers, but he wants to examine the entire package before deciding whether or not he will vote for it.”

Another bill, approved by the Senate Finance Committee, includes many proposals adopted by Mr. Thomas but would be revenue neutral. If the two bills are approved by the House and Senate, they would have to be reconciled in conference.

The two measures originally appeared far apart, but lawmakers have begun to close the gap.

“It’s looking like while initially there were very big differences between the House and Senate versions … Mister Thomas has made some amendments to his, and hopefully we will have a bill in place by year-end,” said Selva Ozelli, an international tax expert with New York-based firm RIA.

Companies have fought hard to be considered manufacturers and for other breaks.

In Mr. Thomas’ bill, for example, “manufacturing” includes traditional factory production, as well as farming, mining, software, movies, music and oil and gas refining, according to documents outlining the proposal.

Companies in those categories would see tax rates fall from 35 percent today to 32 percent by 2007.

Lobbying coalitions are broken down among companies that want benefits to replace the subsidies being repealed, and firms that see the rewrite as an opportunity to update the tax code for their benefit.

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