WASHINGTON – A bill that would end a nasty trade war with Europe and shower more than $140 billion in tax breaks on American companies is nearing congressional approval.
The House could take up the measure as soon as Thursday and Senate debate is expected to quickly follow as lawmakers rush to complete work on the bill before their expected adjournment on Friday.
There was a possibility that Senate action could be delayed until the weekend if supporters of greater regulation of tobacco decide to mount a filibuster (search) against the tax package. These senators said they were still weighing their options.
The measure, which was approved by a Senate-House conference committee on Wednesday, would repeal a tax break for thousands of American exporters that has been ruled illegal by the World Trade Organization (search). American exports to Europe are being hit by penalty tariffs until Congress repeals the outlawed export subsidy.
As a replacement, the tax bill offers more than $140 billion in tax breaks for a wide range of businesses, from multinational companies to bow and arrow makers. Fishermen, farmers and taxpayers in states that do not have individual state income taxes would also benefit.
The conference committee also approved a $10.1 billion buyout to provide tobacco farmers with payments for selling back to the government the quotas they own and which govern how much tobacco can be grown each year.
But negotiators rejected a Senate plan that linked the buyout to allowing tobacco regulation by the Food and Drug Administration (search). That rejection angered senators who said they would never have backed the farmers' buyout without the FDA regulation.
"What the conferees have done is remove the lynchpin in the passage of this legislation in a complete sellout to the tobacco companies," said Sen. John McCain, R-Ariz.
Some senators had raised the possibility of stalling the tax legislation if the FDA regulation were removed by mounting a filibuster against the overall tax bill.
But the Republican leadership is counting on the approaching election to force Democrats to drop their efforts to delay the bill, which offers buyouts that are popular in tobacco-growing states in the South where Senate seats are at stake.
Democrat Erskine Bowles, in a tight race in North Carolina to succeed Democratic Sen. John Edwards, broke off campaigning on Wednesday to fly to Washington and lobby senators to pass the tax bill even without the FDA regulation.
President Bush has taken an arms-length approach to the legislation in an effort to ward off attacks from Democratic rival John Kerry over the many corporate tax breaks in the bill.
The measure approved by the conference committee takes the $57.7 billion saved over 10 years by eliminating the export subsidy and uses that money to help provide more than $130 billion in new tax breaks. To avoid making the budget deficit worse, the proposal also would close a variety of corporate loopholes and tax shelters, saving an estimated $81.7 billion over 10 years.
The biggest single new tax break, with a price tag of $76.5 billion over 10 years, is aimed at helping America's beleaguered manufacturing sector, which has lost 2.7 million jobs over the past four years. But manufacturing is broadly defined to include construction companies, engineering and architectural firms and movie and recording studios.
Critics questioned the need for the new tax breaks included in the 633-page bill and said the estimates that the provisions are totally paid for will almost surely prove incorrect.
Joan Claybrook, president of Public Citizen, said one of the "biggest corporate welfare items" included in the bill would allow America's largest and most profitable energy companies to reclassify their production as a manufactured goods to qualify for the new manufacturing assistance.
"The energy industry has successfully pressured Congress for a heap of pork on a corporate tax bill," Claybrook charged.
"Congress is preparing to enact massive new corporate tax breaks, despite record-high federal deficits and record-low corporate tax payments," said Fair Taxes for All, a coalition of groups that lobby on tax issues.
Supporters, however, argued that the tax breaks would make U.S. companies more competitive and promote domestic job growth.