President Bush yesterday signed into law the most sweeping changes to the corporate tax code in nearly two decades.
The bill creates roughly $140 billion in tax cuts for businesses and is designed to end a trade war with the European Union.
It provides broad tax relief for domestic manufacturers and multinational corporations in an attempt to make them more competitive internationally.
But it includes many narrowly constructed benefits, including a $10 billion payout for tobacco growers and tax breaks for foreign gamblers, NASCAR track owners and importers of Chinese ceiling fans.
Congress paid for the measure by ending an export subsidy that was worth about $50 billion over 10 years and closing a series of other loopholes, including a crackdown on companies that move their headquarters offshore to find lower taxes, taking away write-offs for small businesses that buy bulky sport utility vehicles, and eliminating shelters in which corporate executives could stash income.
“I signed a bill that’s going to help our manufacturers — that will save $77 billion over the next 10 years for the manufacturing sector of America,” Mr. Bush said at a campaign stop in Canton, Ohio.
In the bill, manufacturing was defined to include architecture, oil and gas extraction, construction, some farming and other forms of production.
Mr. Bush signed the American Jobs Creation Act of 2004 while aboard Air Force One. He had signed previous tax bills with more fanfare.
The tax package, which faced sometimes scathing criticism because of its narrowly focused provisions, won overwhelming approval in Congress. Only 17 senators voted against it while another 13, including Democratic presidential nominee Sen. John Kerry and his running mate, Sen. John Edwards, did not cast a ballot. The House voted 280-141 in favor of the legislation.
“There are a lot of important things in this bill, like ending the punitive European tariffs on our manufacturers and cutting taxes for American manufacturers. But George Bush filled the bill up with corporate giveaways and tax breaks for multinational companies that send jobs overseas,” said Phil Singer, spokesman for Mr. Kerry.
Mr. Kerry would call for the repeal of the “unwarranted” international tax breaks, Mr. Singer said.
Republicans disputed Mr. Kerry’s assessment.
“This tips the scales of global competitiveness more in favor of American businesses. It’ll do more to help to maintain and create jobs in the United States than any law in decades,” said Sen. Charles E. Grassley, Iowa Republican and an author of the bill.
The 650-page measure started as a more compact tax rewrite designed to end the EU sanctions by bringing the United States into compliance with international trade law, and simplify the corporate tax code.
The World Trade Organization in 2002 ruled against an export subsidy couched as a $50 billion tax break, and allowed the European Union to retaliate with sanctions up to $4 billion a year.
Europe responded by slowly squeezing U.S. producers. In March it levied sanctions on about 1,600 U.S. products, starting at 5 percent and rising one percentage point each month — to 12 percent in October. The tariffs priced many U.S. goods, including wood, toys and jewelry, out of the 25-nation market.
But Europe has raised concerns that the bill phases out the export subsidy, rather than eliminating it immediately. European officials also have noted that American aircraft manufacturer Boeing is the biggest beneficiary of the illegal subsidy, and that Europe and the United States are embroiled in a battle over subsidies paid to domestic aircraft industries.
EU Trade Commissioner Pascal Lamy on Monday will publicly announce whether the EU sanctions will continue to apply, said Anthony Gooch, EU spokesman in Washington.