Can anybody explain how it makes sense to give tax breaks to Corporations when the budget deficit runs to about $500 billions?
http://quote.bloomberg.com/apps/news...top_world_news
Congress Passes $145 Bln Tax Cut, Ends Export Subsidy
Oct. 11 (Bloomberg) -- The U.S. Congress approved a $145 billion bill providing new corporate tax breaks and a buyout for tobacco farmers as part of legislation that eliminates an export tax credit ruled illegal by the World Trade Organization.
The Senate passed the bill 69-17, four days after the House approved the measure. The legislation will end European Union sanctions on products such as wood, paper, clothing, and jewelry and create jobs in the U.S., said Senator Charles Grassley, the Iowa Republican who chairs the Finance Committee.
``This is a well-balanced bill,'' Grassley said. ``It accomplishes a goal that we should have accomplished a year and a half ago.''
The Senate's vote caps a two-year effort to repeal the Foreign Sales Corporation rule, a $50 billion tax break that the WTO said violated international trade rules. The WTO authorized the EU tariffs, which started at 5 percent in March and reached 12 percent on Oct. 1. If fully phased in, the sanctions would cost U.S. companies $4 billion a year.
The bill, which benefits manufacturers and companies with overseas business, will be sent President George W. Bush for signature into law ``as soon as possible,'' said Amy Call, a spokeswoman for Senate Majority Leader Bill Frist of Tennessee.
In Brussels, EU Trade Commissioner Pascal Lamy said the export subsidy, which will be phased out over three years, may remain in place for some companies for too long. He said the commission would study ``in particular'' the transition period and other provisions that may let American businesses continue to claim the benefit during the phase-out period.
``I am pleased that Congress has finally take this step towards U.S. compliance with the WTO ruling,'' Lamy said. ``It vindicates the EU's patient but firm approach.''
Tax Breaks
The export tax break that is being phased out primarily benefits a dozen exporters including Redmond, Washington-based Microsoft Corp., Chicago-based Boeing Co., and Peoria, Illinois's Caterpillar Inc. and puts in its place a $76.5 billion tax cut for a wide range of manufacturers, including energy producers such as Irving, Texas-based Exxon Mobil Corp. and electric utilities. That measure reduces manufacturers' rates to 32 percent from 35 percent.
The legislation also reduces taxes by $42.6 billion over the next decade for companies operating internationally such as General Electric Co., New York's Citigroup Inc., and Hewlett- Packard Co., based in Palo Alto, California. General Electric, which runs its world operations from Fairfield, Connecticut, may save more than $8 billion over the next decade from these changes by avoiding U.S. taxes on the foreign profits of its financing businesses, according to an analysis by Democrats on the House Ways and Means Committee.
``There is so much stuff in here that everybody is happy to some degree,'' said Bill Reinsch, president of the National Foreign Trade Council in Washington, which represents companies such as Boeing and Detroit's Ford Motor Co.
The legislation faced opposition from dozens of senators including Massachusetts Democrat Edward Kennedy and Ohio Republican Mike DeWine who were angry that House and Senate negotiators removed from the bill a provision authorizing the Food and Drug Administration to regulate tobacco products, including cigarette advertising.
The bill ``is a lobbyist dream and a middle class nightmare,'' Kennedy said. ``It's an embarrassment to a representative democracy.''
The bill also drew criticism from Republican Senator John McCain of Arizona, who called it ``the worst example of the influence of special interests that I have ever seen.''
Tobacco
The Senate added the FDA authority to the legislation earlier this year after the House added to the bill a $10.1 billion industry-financed payment to tobacco farmers to forgo Depression-era subsidies in order to gain dozens of votes from Democrats in tobacco-farming states.
`` It is absolutely irresponsible to address a quota buyout for tobacco farmers, as this conference report does, while ignoring the urgent need for FDA authority to prevent cigarette companies from entrapping our kids,'' Kennedy said during floor debate.
The bill contains dozens of tax breaks tailored to narrow constituencies, including a one-year opportunity for multinational companies such as Hewlett-Packard and Indianapolis- based Eli Lilly & Co. to return foreign profits to the U.S. at a tax rate of 5.25 percent, instead of the usual 35 percent rate.
State Sales Tax
The bill also reinstates for two years a pre-1986 law allowing residents of nine states without an income tax to deduct state and local sales taxes on their federal tax return. The tax break, good in 2004 and 2005, will save residents of Texas, Tennessee, Alaska, Nevada, Florida, Washington, South Dakota, and Wyoming about $5 billion, according to the Joint Committee on Taxation.
Hewlett-Packard Co. and Eli Lilly & Co. won a one-year 85 percent reduction on the U.S. tax they pay when they bring home profits earned outside the U.S. They failed to obtain a lifting of restrictions on the use of that money. The legislation requires companies that claim the deduction to use their repatriated profits to create jobs and limits their ability to use the cash for other pursuits, such as dividends for shareholders.
Most companies now leave their foreign profits overseas rather than pay the 35 percent U.S. tax they face if they repatriate the money.
Companies that benefited from the export tax break, including Microsoft, Caterpillar and Boeing, will get less tax relief from the manufacturing tax break and the changes to international tax rules than they got under the old rules.
Treasury Secretary
Treasury Secretary John Snow last week criticized the bill because it included a ``myriad of special interest tax provisions'' benefiting cruise ship operators, NASCAR, makers of bows and arrows and fishing tackle boxes, and importers of ceiling fans such as Home Depot Inc, based in Atlanta, Georgia.
Treasury spokeswoman Tara Bradshaw said Snow finds the final bill acceptable.
``While we would have liked to have seen more of the targeted tax provisions eliminated, the overall bill is positive for American workers and because Congress has reduced the cost of these provisions, the bill is now budget neutral,'' she said.
Keith Ashdown, vice president of tax policy at Taxpayers for Common Sense, a nonpartisan research institution, said the bill ``is a bonanza of bailouts to the nation's biggest companies that are already not paying their fair share.''
Deficit Impact
The legislation would cut taxes for corporations by a net $17.5 billion during the next three years. It wouldn't have an impact on federal deficits over a 10-year period because most of the tax cuts would be paid for with tax-raising provisions that penalize companies for abusing tax shelters and fuel tax laws, Grassley said.
``This bill does not add one dime to the federal deficit,'' he said.
It also ends a tax break that encourages small business owners to buy luxury sports utility vehicles that was costing the U.S. government $137 million a year.
The bill raises $27 billion by banning companies such as Wachovia Corp., Bank of America Corp., both of which are based in Charlotte, North Carolina, and New York's Altria Group Inc. from claiming depreciation tax breaks by leasing transit systems, sewer systems, air traffic control systems and other publicly funded infrastructure without actually operating them.
It also makes it more costly for companies to move from the United States to a tax-haven country like Bermuda, making it less attractive for companies that had considered such a move, called a ``corporate inversion'' like Connecticut's The Stanley Works considered making in 2002.
To contact the reporter on this story:
Ryan J. Donmoyer in Washington at [email protected]
To contact the editor responsible for this story:
Glenn Hall at [email protected].
http://quote.bloomberg.com/apps/news...top_world_news
Congress Passes $145 Bln Tax Cut, Ends Export Subsidy
Oct. 11 (Bloomberg) -- The U.S. Congress approved a $145 billion bill providing new corporate tax breaks and a buyout for tobacco farmers as part of legislation that eliminates an export tax credit ruled illegal by the World Trade Organization.
The Senate passed the bill 69-17, four days after the House approved the measure. The legislation will end European Union sanctions on products such as wood, paper, clothing, and jewelry and create jobs in the U.S., said Senator Charles Grassley, the Iowa Republican who chairs the Finance Committee.
``This is a well-balanced bill,'' Grassley said. ``It accomplishes a goal that we should have accomplished a year and a half ago.''
The Senate's vote caps a two-year effort to repeal the Foreign Sales Corporation rule, a $50 billion tax break that the WTO said violated international trade rules. The WTO authorized the EU tariffs, which started at 5 percent in March and reached 12 percent on Oct. 1. If fully phased in, the sanctions would cost U.S. companies $4 billion a year.
The bill, which benefits manufacturers and companies with overseas business, will be sent President George W. Bush for signature into law ``as soon as possible,'' said Amy Call, a spokeswoman for Senate Majority Leader Bill Frist of Tennessee.
In Brussels, EU Trade Commissioner Pascal Lamy said the export subsidy, which will be phased out over three years, may remain in place for some companies for too long. He said the commission would study ``in particular'' the transition period and other provisions that may let American businesses continue to claim the benefit during the phase-out period.
``I am pleased that Congress has finally take this step towards U.S. compliance with the WTO ruling,'' Lamy said. ``It vindicates the EU's patient but firm approach.''
Tax Breaks
The export tax break that is being phased out primarily benefits a dozen exporters including Redmond, Washington-based Microsoft Corp., Chicago-based Boeing Co., and Peoria, Illinois's Caterpillar Inc. and puts in its place a $76.5 billion tax cut for a wide range of manufacturers, including energy producers such as Irving, Texas-based Exxon Mobil Corp. and electric utilities. That measure reduces manufacturers' rates to 32 percent from 35 percent.
The legislation also reduces taxes by $42.6 billion over the next decade for companies operating internationally such as General Electric Co., New York's Citigroup Inc., and Hewlett- Packard Co., based in Palo Alto, California. General Electric, which runs its world operations from Fairfield, Connecticut, may save more than $8 billion over the next decade from these changes by avoiding U.S. taxes on the foreign profits of its financing businesses, according to an analysis by Democrats on the House Ways and Means Committee.
``There is so much stuff in here that everybody is happy to some degree,'' said Bill Reinsch, president of the National Foreign Trade Council in Washington, which represents companies such as Boeing and Detroit's Ford Motor Co.
The legislation faced opposition from dozens of senators including Massachusetts Democrat Edward Kennedy and Ohio Republican Mike DeWine who were angry that House and Senate negotiators removed from the bill a provision authorizing the Food and Drug Administration to regulate tobacco products, including cigarette advertising.
The bill ``is a lobbyist dream and a middle class nightmare,'' Kennedy said. ``It's an embarrassment to a representative democracy.''
The bill also drew criticism from Republican Senator John McCain of Arizona, who called it ``the worst example of the influence of special interests that I have ever seen.''
Tobacco
The Senate added the FDA authority to the legislation earlier this year after the House added to the bill a $10.1 billion industry-financed payment to tobacco farmers to forgo Depression-era subsidies in order to gain dozens of votes from Democrats in tobacco-farming states.
`` It is absolutely irresponsible to address a quota buyout for tobacco farmers, as this conference report does, while ignoring the urgent need for FDA authority to prevent cigarette companies from entrapping our kids,'' Kennedy said during floor debate.
The bill contains dozens of tax breaks tailored to narrow constituencies, including a one-year opportunity for multinational companies such as Hewlett-Packard and Indianapolis- based Eli Lilly & Co. to return foreign profits to the U.S. at a tax rate of 5.25 percent, instead of the usual 35 percent rate.
State Sales Tax
The bill also reinstates for two years a pre-1986 law allowing residents of nine states without an income tax to deduct state and local sales taxes on their federal tax return. The tax break, good in 2004 and 2005, will save residents of Texas, Tennessee, Alaska, Nevada, Florida, Washington, South Dakota, and Wyoming about $5 billion, according to the Joint Committee on Taxation.
Hewlett-Packard Co. and Eli Lilly & Co. won a one-year 85 percent reduction on the U.S. tax they pay when they bring home profits earned outside the U.S. They failed to obtain a lifting of restrictions on the use of that money. The legislation requires companies that claim the deduction to use their repatriated profits to create jobs and limits their ability to use the cash for other pursuits, such as dividends for shareholders.
Most companies now leave their foreign profits overseas rather than pay the 35 percent U.S. tax they face if they repatriate the money.
Companies that benefited from the export tax break, including Microsoft, Caterpillar and Boeing, will get less tax relief from the manufacturing tax break and the changes to international tax rules than they got under the old rules.
Treasury Secretary
Treasury Secretary John Snow last week criticized the bill because it included a ``myriad of special interest tax provisions'' benefiting cruise ship operators, NASCAR, makers of bows and arrows and fishing tackle boxes, and importers of ceiling fans such as Home Depot Inc, based in Atlanta, Georgia.
Treasury spokeswoman Tara Bradshaw said Snow finds the final bill acceptable.
``While we would have liked to have seen more of the targeted tax provisions eliminated, the overall bill is positive for American workers and because Congress has reduced the cost of these provisions, the bill is now budget neutral,'' she said.
Keith Ashdown, vice president of tax policy at Taxpayers for Common Sense, a nonpartisan research institution, said the bill ``is a bonanza of bailouts to the nation's biggest companies that are already not paying their fair share.''
Deficit Impact
The legislation would cut taxes for corporations by a net $17.5 billion during the next three years. It wouldn't have an impact on federal deficits over a 10-year period because most of the tax cuts would be paid for with tax-raising provisions that penalize companies for abusing tax shelters and fuel tax laws, Grassley said.
``This bill does not add one dime to the federal deficit,'' he said.
It also ends a tax break that encourages small business owners to buy luxury sports utility vehicles that was costing the U.S. government $137 million a year.
The bill raises $27 billion by banning companies such as Wachovia Corp., Bank of America Corp., both of which are based in Charlotte, North Carolina, and New York's Altria Group Inc. from claiming depreciation tax breaks by leasing transit systems, sewer systems, air traffic control systems and other publicly funded infrastructure without actually operating them.
It also makes it more costly for companies to move from the United States to a tax-haven country like Bermuda, making it less attractive for companies that had considered such a move, called a ``corporate inversion'' like Connecticut's The Stanley Works considered making in 2002.
To contact the reporter on this story:
Ryan J. Donmoyer in Washington at [email protected]
To contact the editor responsible for this story:
Glenn Hall at [email protected].
Comment