- The Washington Times - Wednesday, October 20, 2004

The House and Senate recently passed the most significant corporate tax reform bill in decades.

The legislation had overwhelming bipartisan congressional support because it provides U.S. manufacturers and workers broad-based tax relief. Nonetheless, the media has wrongly painted the bill as a cornucopia of “special interest giveaways.” It’s worthwhile to set the record straight about what the bill really achieves and whom it benefits.

First and foremost, the bill ends escalating sanctions on American manufacturers and farmers by resolving a $4 billion annual dispute between the United States and the European Union. The World Trade Organization has consistently ruled that a current tax benefit for U.S. exports (called “FSC-ETI”) violates our trade obligations. As a result, the EU is imposing 12 percent tariffs on many of the most sensitive U.S. exports including, steel, agriculture, livestock, wood and paper products, jewelry, appliances and electronics. These sanctions on our manufacturers and farmers will continue and increase until the United States complies with its trade obligations. The bill ends these punitive sanctions by repealing FSC-ETI.

Second, the bill provides unprecedented tax relief for domestic manufacturing. American manufacturers currently face one of the highest tax rates in the industrialized world. Efforts to reduce this tax burden have failed for decades. Once the bill is signed into law, domestic manufacturers will benefit from an effective 3 percent tax rate cut on manufacturing in the United States. This tax relief will deliver $77 billion in benefits to the domestic economy and create more jobs in the United States.

Third, the bill provides the most significant overhaul of tax laws governing U.S-based multinational companies — the very same firms that employ half of all American manufacturing workers. These companies face 40-year-old tax laws written before the dawn of the global economy. Although the economy has changed, the laws have not. With more than 95 percent of the world’s consumers outside the United States, U.S. businesses and workers must be able to compete in the world marketplace to survive and prosper. This bill provides $42 billion of reforms to bring the tax code into the 21st century by reducing double taxation and enhancing competitiveness so American businesses continue to be the best in the world.

Fourth, for the first time in more than a decade, bill provisions aggressively attack waste, fraud and abuse in the tax code. The bill closes corporate loopholes, shuts down Enron-style tax shelters and goes after businesses and individuals expatriating to avoid tax. These reforms raise enough revenue to fully offset the tax relief provided by the bill. Overall, the bill is revenue neutral — it does not add to the federal budget deficit.

Despite these significant reforms, the media have focused almost exclusively on narrow tax provisions in the bill. News accounts have largely ignored the fact these so-called “special interest” provisions represent only $5 billion over 10 years — that’s less than 5 cents of every dollar of tax relief in the bill.

They also ignore the justification for these provisions. For example, one of the most widely cited “special interest” tax breaks would actually close a current loophole that allows international arrow manufacturers to avoid the arrow excise tax — a tax domestic arrow manufacturers must pay. According to the Salt Lake City Tribune, closing the loophole saved 450 jobs in Utah by preventing Easton Co. from shutting its plant there and relocating to China.

Unfortunately, reporters have not taken the time to fully educate themselves about 95 percent of the bill but have chosen instead to attack “special interest” provisions.

The media have a responsibility to provide the public complete information about how this legislation will end sanctions on U.S. exports, provide needed tax relief to U.S. manufacturers, make our businesses and workers competitive in the global market, and shut down corporate tax abuses, all with no net revenue effect to the federal budget.

We anxiously await the rest of the story.

Bill Thomas, California Republican, is chairman of the House Ways and Means Committee.

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