House Committee Approves Corporate Tax Cut Bill

by Leroy Baker, Tax-News.com, New York

16 June 2004

Aided by support from a handful of Democrats, the House Ways and Means Committee on Monday approved the measures in a corporate tax bill designed to persuade the European Union to end escalating tariffs on US goods.

The tax cuts and spending measures contained in the bill will cost a total of $155 billion, although offsetting measures such as the closure of loopholes and anti-tax evasion measures will save around $34 billion.

At the heart of the bill is a 3% tax cut for US manufacturers to compensate for the loss of FSC-ETI legislation ruled illegitimate by the WTO, which is the source of EU sanctions on goods imported from the US that are rising monthly and now stand at 8%.

Although the House bill does not contain quite the number of special interest measures as the 980 page Senate version, it has still drawn fire from many quarters for its additional proposals, such as a $10 billion buyout for tobacco farmers and a measure allowing taxpayers to deduct state sales tax.

"There's always a certain amount of grease that's part of getting any tax policy changes through the process, but with this bill, the actual policy seems secondary to the grease," observed Dan Mitchell of free market think-tank, the Heritage Foundation.

It has also been noted from early in the debate that the bill lacks a hard and fast definition of a ‘manufacturing firm’ which critics say will be exploited by non-manufacturing firms wishing to take advantage of the tax cut.

Indeed, this is a possibility that the legislation’s chief author, Ways and Means Committee Chairman Bill Thomas, has apparently accepted.

"Based upon the broad interpretation of manufacturing, this bill may come very close to a basic across-the-board corporate tax cut," Thomas stated.

After the panel’s approval in a 27-9 vote, the bill may be taken up by the House for debate later this week.

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