WASHINGTON – President Bush on Friday showered $136 billion in new tax breaks on businesses, farmers and other groups as he signed the most sweeping rewrite of corporate tax (search) law in nearly 20 years.
Intended to end a bitter trade war with Europe, the election-year measure, entitled the American Jobs Creation Act, was described by supporters as critically necessary to aid beleaguered manufacturers who have suffered 2.7 million jobs lost over the past four years.
"This legislation will end the European sanctions on American exports, and it will help promote the competitiveness of American manufacturers and other job creators, and help create jobs here in America," White House spokesman Scott McClellan said in Wilkes-Barre, Pa.
There was no ceremony for the bill-signing. McClellan announced the signing on Air Force One as Bush flew to a campaign appearance in Pennsylvania.
Opponents charged that the tax package had not only grown into a massive giveaway that will add to the complexity of the tax system and end up rewarding multinational companies that move jobs overseas, but that a myriad of unrelated items were tacked on to it.
Democrats contended the true costs of the tax cuts would be nearly $80 billion higher because Republicans used accounting gimmicks such as having popular provisions expire after a few years.
Bush's campaign rival, Massachusetts Sen. John Kerry (search), missed the congressional vote on the corporate tax breaks.
Kerry spokesman Phil Singer said there were many important things in the bill but that "George Bush filled the bill up with corporate giveaways and tax breaks for multinational companies that send jobs overseas. In his first budget, John Kerry will call for the repeal of all the unwarranted international tax breaks that George Bush included in this bill."
Bush mentioned the new tax law at the beginning of a health care event in Canton, Ohio, on Friday.
"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," Bush said. "That will help keep jobs here."
The Joint Tax Committee said the overall bill would not increase the deficit because the $136 billion in tax cuts were balanced by $136 billion in tax increases.
"Today, President Bush signed legislation that is critical to American workers," House Ways and Means Chairman Bill Thomas, R-Calif., said in a statement. "This legislation will end sanctions on U.S. exports, provide needed tax relief to U.S. manufacturers, make our businesses and workers more competitive in the global market, and shut down corporate tax abuses -- without increasing the federal deficit."
The original purpose for the legislation was to repeal a $5 billion annual tax break provided to American exporters that was ruled illegal by the Geneva-based World Trade Organization (search). Repeal of the tax break was needed to lift retaliatory tariffs (search) that are now being imposed on more than 1,600 American manufactured products and farm goods exported to Europe.
The bill replaces the $49.2 billion export tax break with $136 billion in new tax breaks over the next decade for a wide array of groups from farmers, fishermen and bow and arrow hunters to some of America's largest corporations.
The legislation also includes a $10.1 billion buyout of quotas held by tobacco farmers. However, a Senate provision that would have coupled this buyout with regulation of tobacco by the Food and Drug Administration was dropped by the conference committee that ironed out differences between the two chambers.
It also reduces the tax rate from 35 percent to 32 percent for domestic manufacturers, both large and small, and provides tax incentives for small businesses and farmers. It reduces double taxation of U.S. businesses engaged in the worldwide market and simplifies complex international tax law.
The legislation also reduced taxes for manufacturing done in the United States; proponents say U.S. businesses will have more resources available to create new jobs and keep existing workers under the measure.
Sen. Charles Grassley, chairman of the Senate Committee on Finance, was the lead Senate author of the legislation.
"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," the Iowa Republican said in a statement. "This is the most comprehensive agricultural, small business and rural community tax incentive package ever written by a Congress."
The House approved the conference report on the bill on Oct. 7 with a vote of 280-141. The Senate passed the same measure four days later with a vote of 69-17.
The measure is the most sweeping overhaul of corporate tax law since 1986. It provides a wide range of tax benefits for native Alaskan whalers, importers of Chinese ceiling fans and NASCAR race track owners.
The centerpiece is $76.5 billion in new tax relief for the battered manufacturing sector, but manufacturing is broadly defined to include not just factories but also oil and gas producers, engineering, construction and architectural firms and large farming operations.
In addition to the $76.5 billion in tax relief for manufacturing, the measure would also provide $42.6 billion in tax relief to multinational companies.
Supporters argued that the tax relief for multinational corporations would boost the competitiveness of U.S. companies, but opponents argued that it would simply provide more tax benefits to support the movement of U.S. jobs overseas.
To pay for the $136 billion total of new tax relief over the next decade, the legislation would rely on the savings from repealing the export subsidy and would close corporate loopholes and tax shelters — thereby raising an estimated $82 billion over the next decade.
The Associated Press contributed to this report.