House Passes Corporate Tax Bill

Democrats helped give Republicans the margin of victory Thursday as the House passed a $155 billion bill Thursday that would cut taxes for American producers and pay tobacco farmers (search) to give up a federal program that shores up crop prices.

The 251-178 vote saw an unusual number of Democrats cross party lines and back a GOP tax bill during an election year. A new federal deduction for state sales taxes (search) and the tobacco program successfully attracted their votes.

The core of the bill aims to resolve a trade dispute with Europe that has slapped punishing tariffs on some American exports. The trade sanctions, now 8 percent, rise another 1 percent each month.

The tariffs retaliate for a U.S. tax break that world trade courts ruled an illegal export subsidy. The White House warned that unless lawmakers quickly change American tax laws, "then the tariffs that were imposed by the EU (search) on March 1st will inflict an increasing burden on American exporters, American workers and the overall economy."

House Republicans said resolving the European standoff and infusing new tax cuts into the economy would mean better economic growth and more jobs.

"Tariffs is another word for taxes," said Rep. J.D. Hayworth, R-Ariz.

Many Democrats disagreed.

"You can put lipstick on a pig, but you can't call it a lady," said Rep. Charles Rangel, D-N.Y. "This is a lousy bill, and it has nothing to do with reform."

The bill passed Thursday reduces the top corporate tax rate for U.S. producers from 35 percent to 32 percent. Some Republicans remained concerned that smaller businesses didn't benefit enough.

To bolster support, tax writers made changes to attract votes from Republicans and Democrats. More than 40 Democrats threw their support behind the bill.

One popular addition gives a new deduction to taxpayers who live in states that impose sales taxes instead of income taxes, letting taxpayers choose whether to deduct income or sales taxes from their federal income tax return.

Some of the items added as enticements also opened the bill to criticism from conservative Republicans and some Democrats about wasteful spending.

"It looks like every lobbyist in town will be celebrating tonight," said Rep. James McGovern, D-Mass.

A program to pay tobacco farmers nearly $10 billion to give up a federal quota program that has propped up their prices is among the changes bringing mixed reviews.

While lawmakers from tobacco-growing districts favored the buyout, others had concerns about its cost.

"The numerous special interest provisions made this a questionable bill at best, but the addition of the tobacco buyout provision was the straw that broke Joe Camel's back," said Rep. Jeff Flake, R-Ariz.

Tiny provisions aimed at bow and arrow makers, tackle box manufacturers and sonar fishing devices have also become targets. Rep. Bill Thomas, R-Calif., chairman of the House Ways and Means Committee, defended the provisions as necessary to level the playing field for small producers.

The bill's $155 billion in tax cuts and spending is mostly paid for by changes that close tax loopholes, shut down tax shelters and other items. The bill's net cost to the U.S. Treasury over the coming decade would be $34 billion.

Some of the money would be raised by letting the Internal Revenue Service (search) use private debt collectors to collect unpaid tax debts. That change has raised eyebrows among Democrats and some Republicans, but opponents have been unable to muster enough support to strip the new authority from the bill.