- The Washington Times - Sunday, May 9, 2004

It started as an effort to eliminate a $5 billion tax break for exporters that irked the European Union. Since then, a tax bill has blossomed into a $170 billion cornucopia of special breaks for the cruise ship industry, former Oldsmobile dealers, NASCAR and makers of bows and arrows.

Critics say it is typically during the dark of night that lawmakers slip such benefits into bills such as the one now before the Senate. This time, however, many of the tax breaks were added in full light of day.

Senate Finance Committee Chairman Charles E. Grassley, Iowa Republican, publicly disclosed most of the benefits and folded them into the corporate tax bill, which Republicans are calling the Jumpstart Our Business Strength (JOBS) bill. Then Mr. Grassley asked colleagues to support the bill.

“Keep in mind,” Mr. Grassley said, “that the JOBS bill could be the last train out of town this year.”

Keith Ashdown, vice president of Taxpayers for Common Sense, said it was an “in-your-face, ‘Here’s your special parochial pork barrel tax provision, now I want your vote,’ approach.”

“It’s brought down other bills, but in this case it’s kind of working,” he said.

Some of the additions have broad support. They include a new tax deduction for mortgage insurance and tax breaks for employers who keep paying employees called to duty in the National Guard and Reserves.

Watchdogs say lawmakers should reject most of the breaks.

Sen. John McCain, Arizona Republican, has reserved 20 amendments that he said he will use to try to strip some of the “pork” out of the bill.

“We’re going to have some fun amendments,” Mr. McCain said. “We’re going to lose.”

Mr. McCain and others say the add-ons are too costly at a time of war and budget deficits.

“There’s only one party on Capitol Hill and it’s the bipartisan spending party,” said Tom Schatz, president of Citizens Against Government Waste.

The Senate Finance Committee said the items benefiting these narrow interests amount to less than $5 billion, not even 3 percent of the bill.

Mr. Schatz said the most outrageous of the additions eliminates a 12.4 percent tax on arrow makers and an 11 percent tax on lightweight bows, while reducing the tax on broadhead arrow tips. The cost to taxpayers is $8 million over a decade.

Lawmakers with bow and arrow manufacturers in their home states argue that domestic producers lose out to imported bows and arrows, which are exempt from the excise taxes paid by U.S. makers.

Among the other additions that have raised eyebrows are:

• A change proposed by Sens. John B. Breaux, Louisiana Democrat, and Olympia J. Snowe, Maine Republican, that allows naval shipbuilders to alter their accounting methods to get better tax treatment. The cost over a decade: $310 million.

• A provision won by Sen. Jeff Bingaman, New Mexico Democrat, to help dealers who sold Oldsmobiles, a line that General Motors stopped making last month. This provision will cost $189 million over a decade.

• A proposal to let NASCAR track owners write off the cost of their grandstand investments over seven years instead of 15 years. The 10-year cost to the Treasury is $92 million.

• A provision delaying for the cruise ship industry its payment of taxes on the airplane tickets, hotels and other services sold in the United States as part of packages. This was inserted at the request of Sen. Lisa Murkowski, Alaska Republican.

• A plan to give Hollywood $1.2 billion in tax breaks to produce small films in the United States, particularly in states along the Mississippi Delta.

Senators covered the entire cost of the bill’s corporate and special interest tax breaks by plugging holes and closing tax shelters that they see as far more egregious.

The biggest one recaptures tens of billions of tax dollars by preventing companies from generating tax deductions by leasing bridges, railroads and subways bought or built with taxpayer dollars, and then writing off the cost of the infrastructure depreciation on their companies’ books.

The Treasury Department estimated that the leases, if unchecked, would drain $34 billion from the Treasury over the next decade.

The bill also prohibits corporations from inventing transactions that have no business purpose other than to lower or eliminate their taxes. The measure also increases the penalties on accountants, lawyers and taxpayers caught using tax shelters.

House leaders have said they do not expect to debate their version of the corporate tax bill, which omits the special interest tax breaks, until the Senate completes its work.

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