- The Washington Times - Tuesday, October 28, 2003

House lawmakers yesterday approved a $60 billion corporate-tax cut designed to help U.S. manufacturers and make multinationals more competitive against foreign rivals.

The Ways and Means Committee voted 24-15 in favor of the tax bill despite complaints from Democrats — and some Republicans not on the committee — that it would add to the deficit and push more U.S. jobs overseas. The Bush administration has offered only tepid support for the measure.

Lawmakers were forced to rewrite part of the tax code that gives tax breaks on U.S. products sold overseas — worth about $50 billion over 10 years — when the World Trade Organization ruled they are illegal export subsidies. The European Union won the right to retaliate with $4 billion a year in trade sanctions.

The opening gave rise to several initiatives from lawmakers and intense lobbying by companies that want to at least break even when the old benefit is repealed, and others that see a chance to rewrite tax provisions to their benefit.

Rep. Bill Thomas, California Republican, spearheaded one of the most ambitious, and costly, solutions. It repeals the tax break that runs afoul of the WTO, offers tax relief and updates portions of the tax code that have been unchanged since the Kennedy administration.

“Our international competitiveness has not been meaningfully enhanced in over 40 years. This bill will make the U.S. more competitive in the 21st century,” said Mr. Thomas, committee chairman.

The bill would redistribute the $50 billion from the export subsidy and add almost $60 billion over 10 years in new costs, according to a congressional estimate. The breaks are phased in and largely backloaded until 2010 and beyond.

The Bush administration is concerned about costs and, while supporting specific aspects of the bill, has offered less than full endorsement of the entire package.

“We would like to see as small of a budget impact as possible,” said Pamela F. Olson, the Treasury Department’s assistant secretary for tax policy.

Mr. Thomas’ bill would cut taxes on manufacturers from 35 percent to 32 percent, offer an across-the-board rate cut for companies with less than $20 million in taxable income, and make a series of changes to benefit U.S. companies that operate overseas.

A number of smaller provisions, such as tax breaks for tackle box, sonar device, and bow-and-arrow manufacturers drew the ire of Democrats but remained in the bill. Other controversial measures, such as vague wording that could have allowed companies like Halliburton tax breaks on the government-contract work in Iraq, were amended out of the legislation.

Democrats attempted to revamp Mr. Thomas’ bill to make it revenue-neutral and focus tax breaks on domestic manufacturers but were defeated.

“I am disappointed that you are holding this vital tax relief hostage to billions and billions in corporate special-interest tax breaks that have nothing to do with preserving American jobs,” New York Rep. Charles Rangel, ranking Democrat on the committee, told Mr. Thomas.

Mr. Rangel’s principle ally in crafting an alternative proposal, Illinois Republican Philip M. Crane, yesterday fell in line with Mr. Thomas.

“While I believe certain steps can and should be taken to improve this legislation, this is a significant step forward, and I support it,” Mr. Crane said.

Other Republicans were not won over. Key senators have opposed adding to the deficit, and on Monday 11 House Republicans wrote lawmakers to oppose Mr. Thomas before the committee vote.

“We cannot recommend his bill at this time … because the international tax component included in his proposal will send more American jobs overseas,” said Rep. Donald A. Manzullo, Illinois Republican, and 10 colleagues.

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