Trade-Dispute Tax Bill May Stall

WASHINGTON – A tax bill aimed at resolving an escalating trade dispute (search) between the United States and Europe may languish until next year, the House's top tax writer said Wednesday.

Ways and Means Committee Chairman Bill Thomas, R-Calif., (search) said delays getting the tax bill into final negotiations between House and Senate lawmakers could mean it won't be completed until after the presidential election.

The bill seeks to eliminate a tax break for U.S. exporters that has been declared an illegal export subsidy in international trade courts. Some goods exported to Europe face escalating tariffs (search) until the offending tax break is dropped.

The tariffs now stand at 9 percent and increase 1 percentage point each month. They would grow to 13 percent by the November election and 15 percent by January if the tax bill isn't passed.

Thomas said the opportunity to work on the bill this summer is almost gone, and he predicted that negotiators will make little headway in the months preceding the presidential election.

"Anybody want to venture the success of anything in the September window?" he said. "Which means we may not get back to this issue until Congress reconvenes in the next Congress."

Work on the bill has been delayed while Senate Republican and Democratic leaders discuss the ground rules for negotiations to reconcile different bills passed in the House and Senate.

Senate Majority Leader Bill Frist, R-Tenn., started moving Wednesday to force the bill into talks, even without an agreement with Democratic leaders.

The Senate's top tax writer said he hasn't given up on completing a bill this year.

"We've got to force the issue eventually," said Senate Finance Committee Chairman Charles Grassley, R-Iowa.

Separate bills passed in the House and Senate this year to eliminate the tax break for exporters and replace it with new tax cuts for American manufacturers.

Manufacturers eager for the new tax breaks have urged Congress to pass the bill quickly, as have some industries hit with punitive tariffs.

The bills have also absorbed dozens of other items that include provisions on tax shelters, energy production incentives and a federal buyout for tobacco farmers.