Senate Attempts To Push Forward Corporate Tax Bill Negotiations

by Mike Godfrey, Tax-News.com, Washington

16 July 2004

Senate Majority Leader Bill Frist on Wednesday unveiled a series of procedural motions that will allow for negotiations to begin between the House and Senate on the international tax bill intended to end European tariffs on US goods.

The negotiations have stalled due to a rift that has opened up between lawmakers concerning a $10 billion buyout of the federal tobacco subsidy program, included in the House version of the tax legislation but absent from the Senate version.

Under the agreement, the Senate will consider a proposal by Sens. Edward Kennedy (D – Mass) and Mike DeWine (R – Ohio) that will permit the FDA to regulate the tobacco industy – a caveat demanded by Senators as a condition of the buyout.

"What this means is we will be proceeding to conference on the FSC/ETI bill," Frist told the Senate.

Whilst the two versions of the tax bill differ, the main thrust of the new legislation will be a 3% corporate tax cut to various US firms in compensation for the loss of FSC-ETI subsidies ruled illegitimate by the WTO. The proposals also include a multitude of other tax and offsetting revenue raising measures.

However, in comments made this week, House Ways and Means Chairman Bill Thomas (R- Calif) predicted that the tax bill is unlikely make much progress in the near term.

"Which means we may not get back to this issue until Congress reconvenes in the next Congress," observed Thomas, who believes that bill is unlikely to be completed before 2005.

Meanwhile, tariffs on European imports of US goods, which currently stand at 9% are rising at 1% per month and will hit 15% by next January.

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