After months of ferocious lobbying from almost every corner of business, Senate leaders struggled on Wednesday to reach agreement on a bill that would overhaul corporate taxes and create more than $170 billion worth of tax breaks for Rust Belt manufacturers, movie studios, drug companies, computer companies, shipbuilders and even Indian tribes.
The bill has been stalled for weeks. It was originally intended to eliminate a tax break for American exporters that has been declared illegal by the World Trade Organization and replace it with new benefits for domestic manufacturers.
Congress and the Bush administration are under pressure to act quickly because the European Union has started to impose retaliatory tariffs on American exports and the tariffs will rise to $4 billion a year if the tax break for exporters is not repealed.
To win enough votes for passage, however, lawmakers from both parties have added many special-interest tax breaks in recent months, and the bill's fate is still uncertain.
On Wednesday, Democrats and Republicans became bogged down in a battle to extend federal unemployment benefits until the end of November. They expired for many workers at the end of last year, and Democrats contended that another extension of jobless benefits was necessary because millions of workers have been out of work for longer than six months.
Republican leaders, saying that Congress had already extended jobless benefits last year, threatened to seek a vote cutting off debate.
Because of the European Union's mounting tariffs, the tax bill is considered essential legislation and has become a magnet for almost every business lobbying group.
The bill's main portion would repeal the old tax break for American exporters -- which would effectively raise about $54 billion over 10 years -- and replace it with a reduction in corporate tax rates on profits from products manufactured in the United States.
But that is only the beginning of the bill's benefits for American companies. It would also give American multinational companies a big one-time tax holiday on foreign profits they have been keeping outside the United States. That provision has been hotly pursued by pharmaceutical companies like Eli Lilly and Schering-Plough, as well as high-technology manufacturers like Hewlett-Packard and Cisco Systems.
Industry analysts estimate that American companies have deferred paying American taxes on as much as $600 billion in foreign profits, and they can continue doing so as long as they keep those profits outside the United States.
To encourage companies to reinvest that money in the United States, the Senate bill would give them one year to bring back those profits, which would be taxed at a rate of only 5 percent rather than the standard 35 percent corporate rate.
The bill contains many other tax breaks, including many that were in the big energy bill that Congress failed to pass last year. Other special interest provisions include tax reductions for television and movie producers that would total nearly $800 million over 10 years; a tax break for liquor distillers worth $484 million; a tax break on bonds issued by Indian tribes that would cost the Treasury $257 million; and a break for Oldsmobile car dealers, who are struggling with the decision by General Motors to shut down the Oldsmobile division, that would cost $189 million over 10 years.
The bill has considerable bipartisan support and was drafted by Senator Charles Grassley, Republican of Iowa, who is the chairman of the Senate Finance Committee, and Senator Max Baucus of Montana, the committee's ranking Democrat.
Though the bill would create about $170 billion in tax breaks for business, its sponsors said it would not cost the Treasury any money over the next 10 years because it would raise an equal amount by eliminating old tax breaks, prohibiting many tax shelters and imposing new customs fees.
Some Democrats attacked the bill as a giveaway to special interests. Senator Bob Graham, Democrat of Florida, read off a list of beneficiaries that included Oldsmobile dealers and liquor companies.
"That might make some people happier, but whether it will get them a job or not is less certain," Mr. Graham said, offering an amendment that would have replaced most of the tax breaks with a tax credit for companies based on the number of additional workers they hire.
Republicans, joined by a number of Democrats, rejected the amendment by a vote of 77 to 22.
Republicans also defeated an amendment by Senator John Breaux, Democrat of Louisiana, that would have forced companies to actually invest in the United States any of the foreign profits they bring back into the country during the tax holiday.
Like many Democrats, Senator Breaux said he would probably vote for the overall bill and was philosophical about the special interest provisions. "It's the last train leaving from the station, so people do what they have to do," he said.New York Times:
