House OKs $10-Billion Buyout of Tobacco Farms

The House approved a $10-billion buyout of tobacco farmers Thursday as part of a measure designed to cut taxes on American businesses by more than $140 billion over 10 years.

The bill, which passed 251 to 178, was originally designed to remove a $4-billion-a-year tax break on U.S. exports that the World Trade Organization had ruled an illegal trade subsidy. But lawmakers, wanting to make it up to U.S. companies, piled on a blanket tax cut for corporations and dozens of special tax breaks to benefit a variety of businesses. Among the winners: alcoholic beverage wholesalers and the large retail chains that sell liquor; companies other than airlines that own aircraft; and manufacturers of fishing tackle boxes, bows and arrows and ceiling fans.

The Senate passed its own tax bill last month, but there are such significant differences between the measures that House aides said there was a good chance Congress would not be able to agree on a bill to send to the White House.

However, Congress faces pressure to pass a bill because the European Union is imposing retaliatory tariffs on U.S. exports. The assessments are increasing 1 percentage point a month up to 17%. The current rate is 8%.

To win enough votes for passage, the bill’s House drafters included a provision that would allow taxpayers to deduct sales taxes from their federal tax bill if they did not deduct state income taxes. That would be a break for taxpayers in the seven states without income taxes: Texas, Florida, Washington, Nevada, Wyoming, Alaska and South Dakota.

Many of the 48 Democrats who voted for the House measure were lured by the sales tax provision or the buyout for tobacco growers.

The tobacco provision would end the Depression-era quota system for tobacco and aid growers, whose livelihoods have been hurt by government’s crackdown on tobacco.

The issue has developed into such a hot election-year political issue in the nine tobacco-growing states that some Democrats voted for the bill because of that one issue.

“Let’s do right by our farmers,” said Rep. Mike McIntyre (D-N.C.).

An average tobacco farm could expect to receive about $120,000 from the buyout, congressional aides from tobacco states said.

Rep. Martin Meehan (D-Mass.) criticized the measure as a massive giveaway to the producers of “the only product that will kill you if used specifically as directed.”

As for the debate on the corporate tax provisions, it highlighted the differences between the Republican and Democratic approaches to improving the country’s economy.

Republicans, who wrote the bill, argued that it was important to help large American-based multinational corporations because they were the engines of the U.S. economy.

“If American multinational companies are not competitive, we lose jobs all across this country,” said Rep. Nancy L. Johnson (R-Conn.). “This is a jobs bill.”

Democrats said the bill, “The American Jobs Creation Act,” was misnamed because it would send more jobs overseas and drive the country further into debt while padding the profits of corporate America.

“You can put lipstick on a pig, but you can’t call it a lady,” said Rep. Charles B. Rangel (D-N.Y.). “They say this legislation creates jobs, but not for Americans. It creates jobs overseas.”

Rep. Mike Thompson of St. Helena, one of the Democrats who voted for the bill, pointed out that the 450 wineries in his district, as well as Hewlett-Packard Co. and Intel Corp., would gain from a provision allowing the tax-free repatriation of profits earned overseas.

Among California Democrats, Thompson was joined by Calvin Dooley of Hanford in supporting the bill. Among the state’s Republicans, Rep. Dana Rohrabacher of Huntington Beach opposed it.

One of the most outspoken Republican critics was Small Business Committee Chairman Donald A. Manzullo of Illinois. He argued that the bill’s tax relief should be directed to domestic manufacturing operations, not overseas, because they were losing the benefit of the export tax break that would be repealed by the bill.

Most small U.S. manufacturers would not benefit from the blanket tax relief in the bill because it applied only to corporations that paid corporate taxes. For those corporations, the top tax rate would be reduced from 35% to 32%.

The measure provides tax “relief only to the large corporations,” Manzullo said. “I cannot support that.”