WASHINGTON – The House easily approved legislation Friday making a series of retirement tax breaks permanent, rebuffing a campaign-season effort by Democrats to boost taxes on corporate executives.
The vote on the bill was 308-70. It would remove a 2010 expiration date from part of last year's $1.35 trillion tax cut that boosts contribution limits to 401(k) plans and individual retirement acco-line split, against the Democratic proposal, which in addition would have highlighted corporate problems like the demise of Enron Corp. and the flight of U.S. firms to Bermuda to escape taxes.
Paraphrasing what he said was a lyric from a Willie Nelson song, Rep. Lloyd Doggett, D-Texas, said, "Let me tell you, the people who've got the money, honey, are the people running this Congress."
Republicans accused Democrats of trying to hijack the bill to retain retirement tax cuts and use the measure as a political weapon for this fall's elections, when control of the House and Senate are at stake.
Democrats are trying to squeeze a "mean-spirited, nasty little drop of political diatribe" from the Enron debacle, said House Majority Leader Dick Armey, R-Texas.
Last year's tax cut included provisions to permit increasingly higher annual contributions to tax-favored 401(k) plans until they reach $15,000 in 2006; contributions to individual retirement accounts would top out at $5,000 in 2008. If the Dec. 31, 2010, "sunset" date is not repealed, both retirement-plan contributions would drop to 2001 levels and numerous other changes, including higher "catch-up" limits for people over 50, would disappear.
The bill, which would add $6.1 billion to the 10-year cost of the tax cut, would face an uncertain future in the Democratic-led Senate even though many Democrats support it.
Besides repealing the sunset date for the retirement tax breaks, the Democratic alternative included provisions:
--Preventing companies from deducting more than $1 million in executive compensation if it was based on improved performance that came through manipulation of employee pension funds.
--Taxing deferred compensation benefits for executives if they are protected from bankruptcy or other financial problems.
--Requiring corporate executives to pay capital-gains taxes on their stock options when their corporation moves overseas, such as those reincorporating in Bermuda for tax purposes. Shareholders currently must pay these taxes, but not executives.
House Republicans in April pushed through legislation adding more worker protections to U.S. pension laws, including greater notice for workers about changes to their 401(k) accounts and the right to sell employer-matched stock in those plans after three years. It has not passed the Senate.
On the moves by corporations to tax havens like Bermuda, many GOP leaders favor a short moratorium while a more comprehensive solution is worked out next year. House Majority Leader Dick Armey, R-Texas, spoke for many in his party -- and reflected Bush administration sentiment -- in saying this week that the nation's tax laws are the problem.
"Tax competition is a fact of life," Armey said. "Within the United States, companies move to states with lower tax rates, just as people do. We should fix this problem with our tax code and make our economy stronger."