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Special interest breaks pile on tax bill

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Special interest breaks pile on tax bill

Everyone from cruise ship industry to NASCAR takes a biteBy Mary Dalrymple

The Associated Press

Updated: 8:57 p.m. ET May 09, 2004

WASHINGTON - It started as an effort to eliminate a $5 billion tax break for exporters that irked the European Union. Since then, a tax bill has blossomed into a $170 billion cornucopia of special breaks for the cruise ship industry, former Oldsmobile dealers, NASCAR and makers of bows and arrows.

Typically, critics say, it is during that dark of night that lawmakers slip such benefits into bills like the one now before the Senate. This time, however, many of the tax breaks were added in full light of day.

The Senate Finance Committee chairman publicly disclosed most of them and folded them into the corporate tax bill, which Republicans are calling the Jumpstart Our Business Strength (JOBS) bill. Then Sen. Charles Grassley, R-Iowa, asked colleagues to support it.

"Keep in mind," Grassley said, "that the JOBS bill could be the last train out of town this year."

Keith Ashdown, vice president of Taxpayers for Common Sense, said it was an "in-your-face, 'Here's your special parochial pork barrel tax provision, now I want your vote,' approach."

"It's brought down other bills, but in this case it's kind of working," he said.

Some of the additions have broad support. They include a new tax deduction for mortgage insurance and tax breaks for employers who keep paying employees called to duty in the National Guard and Reserves.

Watchdogs say lawmakers should reject most of the breaks.

Sen. John McCain, R-Ariz., has reserved 20 amendments that he said he will use to try to strip some of the "pork" out of the bill.

"We're going to have some fun amendments," McCain said, also acknowledging, "We're going to lose."

McCain and others say the add-ons are too costly at a time of war and budget deficits.

"There's only one party on Capital Hill and its the bipartisan spending party," said Tom Schatz, president of Citizens Against Government Waste.

The Senate Finance Committee said the items benefiting these narrow interests amount to less than $5 billion, not even 3 percent of the bill.

Schatz said the most outrageous of the additions eliminates a 12.4 percent tax on arrow manufacturers and an 11 percent tax on lightweight bows, while also reducing the tax on broadhead arrow tips. The cost to taxpayers is $8 million over a decade.

Lawmakers with bow and arrow manufacturers in their home states argue that domestic producers lose out to imported bows and arrows, which are exempt from the excise taxes paid by U.S. makers.

Among the other additions that have raised eyebrows are:

*Sens. John Breaux, D-La., and Olympia Snowe, R-Maine, asked for a change that allows naval shipbuilders to change their accounting methods to get better tax treatment. The cost over a decade to taxpayers is $310 million.

*Sen. Jeff Bingaman, D-N.M., won help for dealers who sold Oldsmobiles, a line that General Motors stopped making last month. This provision comes at a cost of $189 million over a decade.

*Letting NASCAR track owners write off the cost of their grandstand investments over seven years instead of 15 years. The 10-year cost to the Treasury is $92 million.

*Delaying for the cruise ship industry its payment of taxes on the airplane tickets, hotels and other services sold in the United States as part of packages. This was inserted at the request of Sen. Lisa Murkowski, R-Alaska.

*Giving Hollywood $1.2 billion in breaks from a combination of incentives to produce small and independent films in the United States, particularly in states along the Mississippi Delta.

*Senators covered the entire cost of the bill's corporate and special interest tax breaks by plugging holes and closing tax shelters that they see as far more egregious.

The biggest one recaptures tens of billions of tax dollars by preventing companies from generating tax deductions by leasing bridges, railroads and subways bought or built with taxpayer dollars, and then writing off the cost of the infrastructure depreciation on their companies' books.

The Treasury Department estimated that the leases, if unchecked, would drain $34 billion from the Treasury over the next decade.

The bill also prohibits corporations from inventing transactions that have no business purpose other than to lower or eliminate their taxes. The measure also increases the penalties on accountants, lawyers and taxpayers caught using tax shelters.

House leaders have said they do not expect to debate their version of the corporate tax bill, which omits the special interest tax breaks, until the Senate completes its work.

On the Net:

Information on the bill, S. 1637, can be found at http://thomas.loc.gov/


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