Fri, Oct 03, 2003
HAI tels ANN that that
the US Senate Finance Committee voted 19-2 on Wednesday to approve
a tax package (S. 1637) drafted by Finance Chairman Charles E.
Grassley (R-Iowa) intended to resolve a trade dispute between the
United States and the European Union (EU) before a year-end
deadline for avoiding sanctions against U.S. exports. The bill was
modified in committee to direct more tax benefits to U.S. companies
that run factories overseas, and to foreign-owned firms with U.S.
plants.
The centerpiece of the bill remains a deduction for U.S.
manufacturers, which would be phased in between 2004 and 2009, and
which would amount to a 3 percentage-point reduction in the 35
percent top corporate income tax rate. The tax breaks for overseas
income would be smaller and would take effect later. The
committee-approved bill would allow a partial deduction beginning
in 2010. (Chairman Grassley’s original draft bill would not
have allowed a deduction from overseas income until 2012.)
In another significant concession to companies with foreign
operations, Senator Grassley altered his proposal to permit
overseas profits to be brought into this country during a one-year
period at a 5.25 percent income tax rate. The committee rejected a
proposal by Senator John Breaux (D-LA) to limit the amount of money
that could be brought into the United States at the reduced tax
rate and require companies to spend the money on research and
development, payroll expansion, and pensions.
House Ways and Means Committee Chairman Bill Thomas
(R-California) continues to try to move his own corporate tax
package (H.R. 2896), but HAI reports that he appears to lack
majority support among committee Republicans. Chairman Thomas has
indicated that he hopes to schedule a markup of his bill for next
week in the hope of bringing the bill to the House floor the week
of October 13.
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