Corporate tax bill presents nothing but bad choices
Tuesday, September 21, 2004 7:26 AM PDT
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E-mail this articlePenalty tariffs imposed more than six months ago by the European Union in retaliation for Congress' failure to repeal an illegal tax break for U.S. exporters are beginning to hurt. Associated Press economics writer Martin Crutsinger reports that some 400 companies wrote Congress last week to urge lawmakers approve the legislation required to end the punitive tariffs.
We've not read the text of that letter, but would guess it's a bit heated. Lawmakers on both sides of the aisle easily deserve a tongue lashing over their seeming inability to produce a corporate tax law that conforms to international trade rules.
Congress has no reasonable excuse to offer for the increasing economic pain these penalty tariffs are causing for U.S. manufacturers and exporters. More than 1,600 U.S. exports --- paper, farm products, toys, jewelry, steel, clothing and other manufactured goods --- have been targeted by the EU.
The pain will grow, absent congressional action. The EU chose to impose the $4 billion in sanctions authorized by the World Trade Organization gradually. A 5 percent penalty was imposed on the many U.S. exports last March. It has been ratcheted up by 1 percent each month since. That will continue until it reaches 17 percent, unless Congress acts beforehand.
It's not as though the United States was blindsided by the European retaliation. The U.S. government saw this coming at least four years ago, when the WTO first ruled that the export tax break amounted to an illegal subsidy.
It wasn't until this past March, when the EU began imposing the authorized sanctions, that members of Congress began work on a new corporate tax bill. Within a month, that effort had degenerated into a mad scramble for election-year pork.
By April the bill was loaded with tax breaks totaling $170 billion. There was something for virtually everyone. Beneficiaries included foreign dog-race gamblers, cruise ship operators, NASCAR track owners, bow-and-arrow makers, Oldsmobile dealers and a hotel in Sioux City, Iowa, to name just a few.
The legislation has improved little in the months since. It remains a bloated monument to congressional vote-buying. The bill reportedly does curb some corporate tax abuses, and it would accomplish the original purpose of lifting the penalty tariffs.
But the legislation is seen by many, perhaps most, members of Congress to be a budget-breaker. It's now hard to know which would be worse for the U.S. economy --- the larger budget deficits that would result from this bill or more months of punishing tariffs on a wide range of U.S. exports.
Congress probably would do best to simply walk away from this mess and start over in a lame duck session following the election.
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