Bipartisan vote passes House corporate tax, tobacco buyout bill

WASHINGTON (AP) - The House approved a corporate tax bill Thursday drawing support with recently added provisions including a $10 billion buyout for tobacco growers, a tax reprieve for companies holding profits overseas and a new deduction for taxpayers in states dependent on sales taxes.

The combination of tax and spending elements helped carry the bill to passage on a 251-178 vote with the backing of 48 Democrats. The additions also cost some GOP support: 23 Republicans voted against the bill.

The bill contains gross tax reductions and spending changes that would cost the Treasury $155 billion over the next decade, but other provisions close tax shelters and revise provisions to recapture lost tax dollars so the estimated net loss to the Treasury is only $34 billion through 2014.

The core of the legislation works to end a trade standoff with Europe that has provoked imposition of punishing tariffs on some U.S. exports.

The bill replaces a tax break declared an illegal subsidy in international trade courts with new tax breaks for American producers.

"It will encourage companies to manufacture more goods and keep more goods in the United States while maintaining the global competitiveness of the American economy," said House Majority Leader Tom DeLay, R-Texas.

Treasury Secretary John Snow said the vote marked an "important step toward ending the burden of the tariffs currently being imposed on U.S. exports."

Some Democrats said parts of the GOP-drafted tax cut, such as new tax rules for multinational corporations, promise to produce more jobs in other nations than employment in their home states.

"Under truth in packaging, it should be called the overseas job creation act," said Rep. Sander Levin, D-Mich.

Nevertheless, some Democrats voted for the bill to show support for two recently added items. One gives taxpayers a choice between deducting state sales taxes or state income taxes from their federal taxable income. The two-year, $3.6 billion tax cut offers new benefits to taxpayers in states that rely primarily on sales taxes who cannot benefit from the existing deduction for state income taxes.

The second item would pay tobacco farmers nearly $10 billion to give up a federal quota program that has propped up their crop prices.

Rep. Bob Etheridge, D-N.C., warned that some lawmakers' support for the massive bill rested on the tobacco buyout. "Come back with this buyout or don't come back," he said.

The items that GOP leaders added to bolster support also attracted severe criticism from a few.

"I'm convinced that Congress is bent on losing what little fiscal credibility we have left," said Rep. Jeff Flake, R-Ariz., who voted against the bill. "In the midst of a war, a deficit, and a delicate economic recovery, now is the worst time to spend nearly $10 billion to bail out the tobacco industry."

Keith Ashdown, vice president of Taxpayers for Common Sense, said the bill is "weighed down by a schizophrenic assortment of special interest handouts with the sole purpose of getting this platinum-plated pig to final passage."

Several small items were singled out for harsh condemnation. Two changes reduce excise taxes on U.S. bow and arrow and tackle box manufacturers. Shipping companies, beer and wine distillers and Native Alaskan whalers also won breaks.

Ways and Means Committee Chairman Bill Thomas, R-Calif., said the items leveled the playing field for small industries struggling to compete in global markets.

"Why not allow U.S. arrow manufacturers to be treated the same as foreigners?" he said.

One change blocks companies from using public infrastructure to generate billions in tax deductions. That change alone raises nearly $20 billion over a decade.

The bill also gives the Internal Revenue Service new authority to send private debt collectors after tax debtors.

At the last minute Thursday morning, tax writers dropped an item prohibiting accountants and lawyers from using attorney-client privilege to keep the names of tax shelter investors from the IRS. Several recent court rulings, rejecting the privilege, have ordered companies to turn their lists of investors over to the IRS.


The bill is H.R. 4520.



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