George W. Bush Signs New Corporate Tax Bill

by Mike Godfrey, Tax-News.com, Washington

26 October 2004

The American Jobs Creation Act was given the presidential seal on Friday as President George W. Bush signed the controversial corporate tax package into law in a low-key affair aboard Airforce One.

"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 announced on the campaign trail in Pennsylvania.

The central aim of the legislation is the repeal of subsidies provided to US manufacturers under Foreign Service Corporation laws and the Extra Territorial Income Exclusion Act, in order to comply with a World Trade Organisation ruling and persuade the European Union to rescind punitive tariffs on US goods, which currently stand at 12%.

However, the new bill also provides $76.5 billion in tax relief for a wide ranging set of American producers, in addition to an array of special interest tax breaks catering for more obscure business sectors.

Supporters of the new legislation, such as House Ways and Means committee Chairman Bill Thomas, claim the provisions will be revenue neutral to the Treasury through the inclusion of several revenue-raising measures and loophole closures.

Nevertheless, the legislation has not, unsuprisingly, been greeted with universal enthusiasm, and even the Bush administration has been keen to distance itself from many of the provisions contained within the bill.

In a letter sent to Thomas prior to the Senate’s final approval of the bill earlier this month, Treasury Secretary John Snow urged lawmakers to reconsider the “myriad of special interest tax provisions that benefit few taxpayers and increase the complexity of the tax code."

He also questioned a provision providing a one year tax holiday designed to encourage US multinationals to repatriate profits held abroad by reducing the tax rate to 5.25%, which he feared will discriminate against “US companies that do not have foreign operations and have already paid their full and fair share of tax.”

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