Wednesday, July 21, 2004

Chicago Tribune | Omnibus tax bill indulges lobbyists

Chicago Tribune | Omnibus tax bill indulges lobbyists:
"Congress is on the verge of turning a small tax bill, designed to undo a single corporate subsidy, into a sprawling package of special tax breaks that is leaving reformers and tax-fairness advocates appalled.

The House and Senate have approved differing versions of the legislation, but both share a long list of special-interest tax provisions pushed by Washington's powerful corporate lobbyists.

There are tax breaks for, among others, bow-and-arrow makers, Oldsmobile dealers, NASCAR racetrack owners and producers of fishing-tackle boxes and sonar fish-finders--not to mention a $12 billion buyout for tobacco farmers.

Land developers, ranchers, small-airplane manufacturers, commodity traders and distillers also would benefit from various tax provisions, as would makers of ceiling fans.…"

All this began when the World Trade Organization two years ago ruled illegal a $5 billion U.S. export subsidy for American businesses, granted through creation of so-called foreign sales corporations. In retaliation, Europeans began imposing tariffs on U.S. goods this year.

While the Bush administration supports a repeal of the subsidy to comply with WTO rules, it held its fire as Congress went on a spree of approving corporate tax breaks that in most cases would offset the subsidies U.S. companies would lose.

The ease with which many of the provisions went through both houses not only proved discouraging to tax reformers but also illustrated what they called a lack of fiscal discipline in Washington and a willingness to shred the tax system with new corporate preferences. The Senate approved the bill by voice vote, so no one will know how senators lined up on final passage.

A variety of beneficiaries

Among the beneficiaries are whaling captains recognized by the Alaska Eskimo Whaling Commission, who could claim a charitable income tax deduction of up to $10,500 for expenses supporting Native Alaskan subsistence whaling.

The Senate bill would exclude from U.S. taxation the winnings of foreigners who bet on dog and horse races in the U.S. The House bill would ensure that those who exercise stock options would not have to pay withholding taxes.

To many tax reformers, the bills represent a classic "Christmas tree" of tax breaks that shows who has the real clout in Washington--lobbyists. The tax code has been riddled with new loopholes since it was last reformed, in 1986, when Ronald Reagan was in the White House. Now there likely will be many more.

The multinational-company tax break, with GE as the biggest beneficiary, would reverse provisions in the 1986 tax reform that limited how much large companies could offset U.S. taxes with taxes paid to foreign governments on their overseas earnings.…

The business-tax breaks in the House bill exceed $90 billion, and in the Senate version they amount to almost $170 billion, though much of this would be offset by tightening up on some tax shelters and using a portion of federal gasoline tax revenues.

Both measures would reduce the corporate income tax by 10 percent for manufacturing companies. But the definition of manufacturing would be broadened to include movie production, farming and software production. Small businesses that make less than $20 million a year in profits also would see a cut in corporate taxes.

Daniel Mitchell, a tax expert at the conservative Heritage Foundation, was so outraged by the special-interest tax breaks that he wrote in a report saying Congress should junk them all and "instead reduce the corporate tax rate."

There seems little chance of that.

http://www.chicagotribune.com/news/nationworld/chi-0407210323jul21,1,5460134.story?coll=chi-newsnationworld-hed
con·cept: Chicago Tribune | Omnibus tax bill indulges lobbyists