Business Tax Breaks on Verge of Senate OK

Times Staff Writer

The Senate moved Sunday toward approval of a sweeping corporate tax overhaul -- one of a series of measures with broad appeal to key constituencies that lawmakers were expected to pass before wrapping up their preelection session this week.

During an unusual Sunday session, the bill cleared a procedural hurdle when the Senate voted 66 to 14 to limit debate, paving the way for final passage today of the measure, which would provide almost $136 billion in tax breaks for businesses. The bill includes a buyout for tobacco growers to end a Depression-era price support system.

Tensions in the chamber were heightened when senators -- angry about measures they sponsored that were stripped out of the final bill -- employed delaying tactics that threatened to keep lawmakers from adjourning today and to prevent those up for reelection from hitting the campaign trail.


But by the end of the day, Sen. Mary Landrieu (D-La.), who had attempted to keep the Senate in session until Thursday because of a measure she had sponsored that was removed from the bill, struck a deal with Senate leaders that would allow the chamber to complete its work on the tax bill and two spending bills.

Landrieu, who spent all day on the Senate floor and promised to “stay here morning, noon and night,” had sought to give a tax credit to employers who made up for the lost pay of deployed National Guard and Reserve members. It had been included in an earlier Senate version of the bill but was dropped during negotiations with the House on a final bill.

Under Senate rules, amendments cannot be added to legislation once it has been approved by a conference committee. But Senate leaders agreed Sunday to amend another bill to include Landrieu’s proposal and send it back to the House.

The delay in adjournment had led Sen. Rick Santorum (R-Pa.) to argue that “what is going on in the United States Senate is political demagoguery at the highest levels.”

The fact that the Senate was in session at all on a Sunday provoked the chamber’s senior senator, Robert C. Byrd (D-W.Va.), to chastise his colleagues, complete with biblical references.

“If the ox or the ass were in the pit, as the Bible says, then pull him out if it is on the Sabbath,” Byrd said. “But the ox is not in the ditch.... We’re not here because of some dire emergency that threatens the lives of the American people.”

The legislation under consideration was drafted in response to punitive tariffs -- now at 12%, and increasing by 1 percentage point each month -- imposed by the European Union on 1,600 U.S. products after the World Trade Organization ruled that U.S. tax breaks for those products amounted to illegal trade subsidies.

The 650-page bill would repeal those tax breaks and replace them with others that would stand up to WTO scrutiny, including a provision that would in effect cut 3 percentage points off the top corporate tax rate on manufacturers, hard hit by job losses. The new rate would be 32%.

But since it was one of the last significant pieces of legislation to move through Congress this session, the bill became a magnet for a number of stalled measures.

Political considerations entered the fray as members of Congress sought to include benefits for home-state interests. The bill included tax breaks for -- among other things -- multinational corporations, NASCAR tracks and the horse racing industry, as well as a three-year suspension of a tax paid by alcohol sales outlets and manufacturers. That was sought by the Congressional Wine Caucus, which argued that the levy placed an unfair burden on small wineries and retailers.

Sen. Dianne Feinstein (D-Calif.) voted to limit debate, but said in a statement that she was planning to vote against the bill because it went “far beyond the simple legislative fix needed to bring the U.S. into compliance with the WTO ruling.”

Although the bill offers some benefits for California, such as preserving $2.7 billion in highway funds over five years that the state risked losing because of greater ethanol use, she complained that the legislation offered tax breaks at a time of budget deficits and would cost the entertainment industry $5 billion in increased taxes during the next decade.

“Policymakers should be taking steps to reduce the deficit and improve the economy, not eroding it further by doling out tax breaks to special interests,” Feinstein said.

Sen. Barbara Boxer (D-Calif.), who faces reelection next month, did not vote Sunday. A spokesman said she had “long-standing commitments in California, and she also had to attend to an unexpected family illness.” She intends to return to the Capitol today, the spokesman said.

The House approved the corporate tax overhaul last week, and its members headed home Saturday for the fall campaign.

In addition to passing the tax bill, the Senate is moving to wrap up its preelection session this week. It is expected to approve legislation that would provide $11.6 billion in disaster aid to hurricane victims -- much of it going to Florida, a battleground state in the presidential race -- and a bill that would give $2.9 billion to drought-stricken farmers, including those in South Dakota, where Senate Democratic leader Tom Daschle is facing a tough reelection challenge.

Also expected to be passed is a bill funding military construction that includes a loan guarantee to spur building of a natural-gas pipeline from Alaska to the Midwest -- a project pushed by GOP Sen. Lisa Murkowski, who is locked in a tight race in Alaska.

Sunday’s vote to limit debate on the corporate tax bill came after a group of senators expressed their anger that the measure included the $10-billion buyout of tobacco growers but did not give the government new authority to regulate the sale, distribution and advertising of tobacco products.

The tobacco buyout is popular in tobacco-growing Southern states, especially North Carolina, where a tight race could prove pivotal in deciding which party controls the Senate.

A number of senators, led by Edward M. Kennedy (D-Mass.) and Mike DeWine (R-Ohio), were upset that House-Senate negotiators rejected a measure that would have given the Food and Drug Administration new authority to regulate tobacco, such as requiring companies to place larger warnings on tobacco products and preventing advertising that appeals to children, in return for the tobacco buyout.

DeWine went to the Senate floor Sunday with a box of macaroni and a pack of Marlboro cigarettes to complain that the same company made both but was only required to detail the ingredients of the macaroni.

But Sen. Jim Bunning (R-Ky.), whose state produces tobacco, said that when the Senate passes the bill, “my growers will get their relief, but without the worry of the FDA invading their farms.”

The buyout seeks to aid growers who have struggled to survive amid increased imports and anti-smoking campaigns. It would end the tobacco quota system established during the Depression, which mandates how much each farmer can grow and sets minimum prices.

Keith Ashdown, vice president of policy for Taxpayers for Common Sense, a Washington-based watchdog group, called the bill “a cynical attempt to bribe swing states in one of the closest elections in our nation’s history.”

He added, “Ethanol, tobacco bailout, breaks for NASCAR -- you name it, there is only one thing that the self-indulgent lawmakers who voted for this bill had in mind: How can they use this legislation to guarantee their reelection?”

Congress may reconvene before the election if House-Senate negotiators can reconcile differences between the chambers’ bills to overhaul the nation’s intelligence-gathering systems. A postelection lame-duck session is expected to complete work on spending bills for the 2005 fiscal year, which began Oct. 1.