Corporate Tax Cut Bill Will Benefit Few Firms

by Mike Godfrey, Tax-News.com, Washington

11 August 2004

Fewer than 5% of manufacturing firms would benefit from the tax cuts contained in the Senate bill designed to repeal banned trade subsidies, the Washington Post reported on Tuesday, citing an analysis by the non-partisan Joint Committee on Taxation.

According to the findings of the Committee, only a relatively few 25,000 companies would divide virtually all of the $63.3 billion in tax relief for domestic manufacturing.

Voicing concern over the findings in a letter sent to colleagues on Monday, Sen. John D. Rockefeller IV (D-W. Va.), who is supporting alternative tax proposals, wrote: "More than 95% of manufacturing corporations - the presumed targeted beneficiaries of the provision - receive either no benefit or less than $50,000 of benefit,"

Nevertheless, many more firms stand to gain from the new tax measures than under the banned FSC-ETI regime, which dishes out some $5 billion in subsidies to 1,886 exporters annually, according to the Post.

Lawmakers from both sides of the political divide have been engaged in a desperate attempt to pass the legislation – designed to repeal the banned export subsidy that has led to punitive tariffs imposed by the European Union on US exporters - before November’s elections, mindful that tariffs are rising at 1% per month.

The Senate version, which passed in May, provides for an effective income tax cut on domestic manufacturing to 32% from 35%. The broader House version contains a similar provision but is also aimed at any company with less than $20 million in non-manufacturing profit.

Meanwhile, Rockefeller and Sen. Arlen Specter (R-Pa.) are pushing an alternative proposal that would offer manufacturers a choice between the tax rate cut and a federal tax credit to offset health care costs.

This latter measure would distribute the benefits more equitably by helping firms saddled with huge healthcare costs for ageing workers and retirees, Specter told the Post.

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