Nation & World News
Committee passes
corporate tax cut
The measure, approved by
a 24-15 margin along rigid
party lines, is intended to
create and maintain jobs
By Sumana Chatterjee
Knight Ridder Newspapers (KRT)
WASHINGTON — Republicans on
the House tax-writing committee vot
ed Tuesday to give big multinational
corporations tax cuts totaling $128
billion over 10 years, overcoming De
mocratic opposition.
The measure is intended to avert a
trade war with the European Union
over illegal subsidies for U.S. ex
porters, but the bill is also laden
with special favors for domestic
manufacturers.
The House Ways and Means Com
mittee voted 24-15 along party lines
to make it easier for multinational
firms to claim tax deductions for in
terest and credits for taxes they pay to
foreign governments. The legislation
also would cut the top tax rate for
most U.S. businesses from 35 percent
to 32 percent by 2012. Small busi
nesses with less than $20 million in
annual taxable revenue would also get
an across-the-board tax cut to 32 per
cent by 2012, but their cut would be
phased in depending upon each
firm's taxable revenue.
Supporters of the legislation said
the tax breaks would make American
companies more competitive in the
global economy and ultimately help
them create and keep jobs in the Unit
ed States. The U .S. Chamber of Com
merce, National Association of Man
ufacturers and other business lobbies
backed tire legislation.
Critics, including some Republi
cans from areas hit hard by the manu
facturing slump, worried that the
measure would help companies send
jobs overseas.
The legislation would lower "the
cost of doing business overseas for
American companies. This will neces
sarily encourage American companies
to move American jobs offshore to
China and other locations," wrote
Rep. Donald Manzullo, R-Ill., in a let
ter signed by 10 other Republicans.
Manzullo is chairman of the House
Small Business Committee.
The Senate is working on its version
of corporate tax cut legislation. With
only weeks before this year's session of
Congress ends, it is unlikely that the tax
cuts will be enacted before next year.
Republican leaders pushed the bill
partly to signal to the European Union
that the United States intends to bring
the U.S. tax code into compliance with
international trade rules. The European
Union has threatened to levy $4 billion
in punitive tariffs if Congress doesn't re
peal certain export tax breaks by year's
end. The World Trade Organization,
which monitors ground rules for inter
national trade said $5 billion in annual
U.S. tax breaks for American exporters
are illegal.
Ways and Means tax writers
stripped out many of the illegal
breaks while adding tax benefits to
the same U.S.-based multinationals
so they would not suffer a competitive
disadvantage, Republican aides said.
They also eliminated some corporate
tax shelters and included language to
crack down on companies that move
abroad to avoid paying U.S. taxes.
To broaden support, the tax writers
also sought to speed along the tax cut
for some domestic companies that
makegoods manufactured, produced,
grown or extracted in the United
States. That includes oil and gas com
panies and movie studios that spend
at least 50 percent of film production
expenses in America. For them, the 35
percent top corporate tax rate would
drop to 34 percent next year, then to
32 percent in 2007.
"We started off with a
$4 billion problem and
you guys made it a
$128 billion problem."
Rep. Charles Rangel
D-N.Y.
"We started off with a $4 billion
problem and you guys made it a $ 128
billion problem," said Rep. Charles
Rangel of New York, the top Democ
rat on the committee.
Republicans said the legislation
would protect the companies that ben
efited from the tax breaks that raised the
European Union's ire. "We can't just re
peal those portions of the laws. We
need to make the international benefi
ciaries as whole as possible," said Rep.
Nancy Johnson, R-Conn.
Many of the more expensive new
tax provisions would not go into ef
fect until after 2006.
The potential impart of the new tax
cuts on the federal budget deficit
alarmed many lawmakers, who argued
that the House of Representatives
should follow the Senate's lead by pass
ing a revenue-neutral package that
would not increase the national debt.
The House tax package on balance
would add $60 billion to the deficit,
which is already projected to exceed
$500 billion in the current fiscal year.
"We are now facing very alarming
deficits and passing enormous tax
breaks for corporations that create big
problems for your children," said Rep.
Earl Pomeroy, D-N.D.
(c) 2003, Knight Ridder/Tribune
Information Services.
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continued from page 1
The poll confirmed that Democrats
most strongly favored the surcharge,
with 46 percent in favor and 40 per
cent against. Republicans overwhelm
ingly opposed the tax hike with 69
percent against it and 11 percent in
support.
Independents were more evenly
split with 43 percent saying they would
vote yes and 39 percent saying no.
Taxpayer Defense Fund campaign
manager Angela Wilhelms said she
wasn't surprised by the poll numbers,
adding that her organization is "en
couraged by them." The Taxpayers
Defense Fund is one of the groups be
hind the petition to bring the tax sur
charge to a state vote.
“There's been a groundswell of sup
port for the referendum," Wilhelms
said. "But it's not shocking to see how
much support there is."
Wilhelms said higher taxes would
n't help the state out of a recession
and would drive businesses and oth
er revenue sources out of the state. She
said the referendum would allow
Oregonians a chance to vote on an
important issue.
"1 would encourage people regard
less how they feel about the tax in
crease to support the concept (of the
referendum) to go in front of people"
Wilhelms said. "This is exactly what
democracy is made of."
Bob Lawrence — spokesman for
the Our Oregon Coalition, which is
supportive of the surcharge — said
the organization was actually "some
what encouraged" by the poll num
bers because the opposition to the tax
surcharge was less than 50 percent.
"We're not under any illusion that
... this is any slam dunk for us, but
we're confident that we can get our
word out to people and that people
understand what is at stake here,"
Lawrence said.
Lawrence said the coalition was
currently working on a "grassroots
campaign" and talking to groups that
would be the most affected by the re
jection of a balanced budget. He said
the organization has been in touch
with groups on all of the major cam
puses around the state.
"Most college students know what
the hits on higher education are like,"
Lawrence said. "More budget cuts
mean a bigger impart on college stu
dents."
The tax surcharge will probably re
quire the average Oregon family to
pay about an additional $88 in state
taxes each year, according to the leg
islative Revenue Office. Ihe surcharge
would apply to the 2003, 2004 and
probably the 2005 tax years.
Contact the city/state politics reporter
at shoikeda@dailyemerald.com.
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