Special Interests Hitching Rides on Highway Measure

Flip through the massive highway bill moving through Congress and you’ll encounter some unexpected detours: tax breaks for the limousine industry, gunsmiths, fishing rod manufacturers, even casinos.

A tax break for stores that sell alcoholic beverages appears in the same bill that includes measures to crack down on drunk driving.

Tax concessions in the Senate version of the bill would cost the Treasury more than $3 billion over 10 years, according to the watchdog group Taxpayers for Common Sense. The House bill contains tax breaks worth an estimated $12 billion to businesses over a decade.

As House and Senate negotiators prepare to work as early as this week on the bill’s final version, they are expected to be lobbied heavily by special interests hoping to hitch a ride on the must-pass measure.

Robert L. Bixby, executive director of the Concord Coalition, an Arlington, Va.-based budget watchdog group, said lobbyists were “scrambling to get on board one of the few trains that may actually leave the station.”

“Between election-year gridlock and ballooning budget deficits, there will be few opportunities this year to hide special-interest goodies into ‘must-pass’ legislation,” he said.

Added Keith Ashdown, vice president of the Washington-based Taxpayers for Common Sense: “Lawmakers’ official mantra for coveted tax breaks seems to have become ‘If at first you don’t succeed, try, try again.’ ”

The tax breaks, he said, have “nothing to do with reducing congestion or saving lives on our roads” and “make this budget-busting piece of legislation even fatter and more expensive.”

They range from repeal of a gaming tax, which initially was to apply only to Indian tribes but was extended to casinos, to elimination of a century-old tax on alcohol manufacturers and sales outlets.

Repeal of the gaming tax began as a narrow measure in response to a court case that forced two Oklahoma Indian tribes to pay a federal excise tax on pull-tab games. The tribes contended that since the tax of one-quarter of 1% on wagers -- for example, 25 cents on a $100 bet -- didn’t apply to state-run lotteries, it shouldn’t apply to tribes. “What the IRS has told us is that the tax cost more to collect than they receive in revenue,” said Mark Van Norman, executive director of the National Indian Gaming Assn.

Senate Minority Whip Harry Reid (D-Nev.) offered an amendment that extended the repeal to casinos for bets placed on “sports books” and on certain other games. A Reid aide said the senator wanted to make sure that tribes and casinos were “on an even playing field.”

That increased the estimated cost of the tax repeal from $33 million to $79 million over 10 years, according to one analysis.

Some of the tax breaks tucked into the highway bill have been proposed before but, as often occurs on Capitol Hill, legislation can spring back to life overnight.

Consider a tax break eagerly sought by farm-state lawmakers to promote the use of fuel made from soybeans. It was part of the energy bill, which has stalled, and is now part of the Senate highway bill.

The Senate highway bill also includes a measure long pushed by the Wine Institute, the National Assn. of Convenience Stores and the National Beer Wholesalers Assn. to repeal a century-old occupational tax on alcohol manufacturers and sales outlets. The groups contend that the tax -- $250 per location for retailers, $500 for wholesalers and $1,000 for manufacturers -- places a burden on small wineries and mom-and-pop stores.

This repeal measure has drawn opposition from Mothers Against Drunk Driving, whose national president, Wendy Hamilton, questioned the proposal “at a time when the nation’s efforts to reduce alcohol-related traffic deaths and underage drinking rates have stalled.” Eliminating the tax would reduce revenues to the Treasury by $768 million over 10 years, the government estimated.

A provision in the Senate bill would address what its chief sponsor, Sen. Jim Bunning (R-Ky.), has said is an inequity in the tax treatment of distilled spirits -- reducing Treasury revenue by an estimated $314 million over 10 years.

Another measure would repeal the “gas-guzzler” tax on stretch limos.

“Right now, because of the huge budget deficits that are now popping up again, nobody is willing to come out publicly and do stand-alone tax reduction bills,” said Scott Solombrino, president of the National Limousine Assn.

The limo industry has pushed to repeal the tax for more than a decade, contending that it adds $1,800 to $2,500 to the cost of a stretch limo, forcing some manufacturers out of business and hurting the owners of small fleets of limousines.

And, the industry argues, a similar tax on yachts was eliminated a long time ago. “Some guy driving around in a $5-million yacht burns more gas than I’ll burn all year, and he doesn’t have to pay a tax and I do,” Solombrino said. He called the revenue loss to the Treasury from the tax’s repeal -- estimated at $48 million over 10 years -- “insignificant.”

The Senate bill also includes measures to extend to foreign arrow makers a tax now paid by domestic manufacturers, a measure proponents say is needed to prevent U.S. jobs from moving overseas. The bill also includes a provision to exempt from a firearms tax custom gunsmiths who make fewer than 50 guns a year.

The Senate bill would also impose a $10 cap on the federal excise tax on fishing rods, a measure that a representative of the American Fly Fishing Trade Assn. said is needed to keep U.S. fishing-rod makers from being put at a competitive disadvantage to foreign manufacturers.

The tax breaks are expected to add to the controversy over the highway legislation, which President Bush has threatened to target for his first veto. Both the 984-page House bill, which would provide $275 billion for highways and mass transit over the next six years, and the 1,411-page Senate measure, which would authorize $318 billion, exceed the White House’s spending limit of $256 billion.

The House bill also has drawn opposition from deficit hawks for a host of legislators’ pet transportation projects. The Senate’s version includes more than a dozen unrelated tax breaks.

The Concord Coalition’s Bixby said sponsors of the highway bill are happy to have special interests “hop on board if they bring with them a block of votes to help ensure passage.”

With the threat of a Bush veto, he said, the bill’s sponsors will want to assemble the largest possible coalition to make the bill veto-proof.