- The Washington Times - Tuesday, May 11, 2004

The Senate yesterday approved a $170 billion corporate tax bill that would end a trade fight with the European Union and dole out a series of new breaks for manufacturers, multinationals, energy companies, cruise lines, archery-product makers and other special interests.

Lawmakers voted 92-5 in favor of the legislation after weeks of partisan fighting.

“We did it,” said Sen. Max Baucus, Montana Democrat, who sponsored the bill with Sen. Charles E. Grassley, Iowa Republican.

The measure began with strong backing from both Republicans and Democrats who wanted to comply with a World Trade Organization ruling against a section of the U.S. tax code that offers tax breaks on overseas sales. The WTO ruled they were export subsidies and broke international trade rules.

The ruling allowed the European Union to erect barriers to U.S. exports. Retaliation began March 1 against more than 1,000 American products, and each month the trade bloc was to increase its sanctions.

Despite the sanctions, bipartisan support for the tax bill crumbled when Democrats offered a series of amendments on broader economic policy. They insisted on votes for dozens of amendments on overtime pay, jobless benefits and other politically charged issues.

“It was tough going at times,” Mr. Grassley said.

The bill passed yesterday would strike the export subsidies, worth $50 billion over 10 years, and replace them with a tax cut for domestic manufacturers and new breaks for multinational corporations with overseas operations.

It also offers a series of “sweeteners” to round up votes, including tax breaks for energy production, dog-racing tracks, Oldsmobile dealers, railroads, shipbuilders, Hollywood, an Iowa hotel and NASCAR, according to an analysis by Taxpayers for Common Sense, a watchdog group.

Senate Republicans said the bill’s costs are offset by new revenue from fees, newly closed tax loopholes and other sources.

“We’ve been fooled numerous times by this offset song and dance the Senate plays. What we will have is tens of billions of dollars in deficit spending,” said Keith Ashdown, vice president of Taxpayers for Common Sense.

Sen. Don Nickles, Oklahoma Republican and chairman of the Budget Committee, attacked the bill as “faulty economic policy,” though he eventually voted for it.

Mr. Grassley said the bill would protect American manufacturing jobs and ensure that U.S. companies remain globally competitive. The measure ultimately won broad support.

But the corporate-tax bill and add-ons face an uncertain future. The House must also pass a version of the legislation, though it is not clear when it would come up for a vote and what it would look like after the two houses reconcile their versions.

House lawmakers, who have been monitoring the Senate vote, did not have a time frame to consider their version of the bill.

“The [Ways and Means] Committee and [House] leadership will take a look at the substance what they have done, and then decide how, when and what to move forward. But we do not have concrete timing right now,” said Christin Tinsworth, spokeswoman for House Ways and Means Committee Chairman Bill Thomas, California Republican.

Democrats said immediate prospects were poor.

“I don’t foresee in the near term any movement. That could change as early as after the Memorial Day recess,” said Dan Maffei, spokesman for Ways and Means Democrats.

Voting against the tax bill were: Sen. Bob Graham, Florida Democrat; Sen. Judd Gregg, New Hampshire Republican; Sen. Jon Kyl, Arizona Republican; Sen. Ernest F. Hollings, South Carolina Democrat; and Sen. John E. Sununu, New Hampshire Republican.

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