Washington, D.C. – The following is a statement by Keith Ashdown, Vice President at Taxpayers for Common Sense on the FSC/ETI Corporate Tax Bill:

The 398-page corporate tax legislation is a Christmas tree in June for every special interest with a pulse. As one of the last legislative trains leaving Capitol Hill, every lobbyist is trying to get their clients’ goodies added to the bill and taxpayers will wind up paying for billions of dollars in frivolous giveaways.

The House bill is smorgasbord of special interests giveaways at the expense of everyone else. Fishing, bow and arrow, subsistence whaling, shipping, tobacco, aircraft, pharmaceutical and liquor industries make off like bandits in the legislation. The House bill goes further by cobbling together a $9.6 billion tobacco bailout, which amounts to an expensive carrot to get lawmakers from tobacco states to vote for the legislation. The House bill, with a total of $145 billion in tax relief, carries a net price tag of $34 billion over 10 years. The bill now includes repatriation provisions that allow profits held in tax havens and low-tax jurisdictions to be brought into the U.S. at 5.25%.

Unfortunately, despite historic deficits, congressional leadership is walking in lockstep to enable billions in pork to be added as part of very expensive voting buying scheme of spreading the fat to as many congressional districts as possible. The original purpose of this legislation was to eliminate a $5 billion subsidy that was deemed illegal by the World Trade Organization. It is expected that the legislation will sail through the House faster than you can say pork barrel, but the intricacies of all the add-ons to the legislation make the chances conference success a crapshoot. In an apparent repeat of recent legislation, by adding everything but the kitchen sink to the legislation, the vote buying scheme may have doomed final passage of the legislation.

Despite this being one of the biggest, most unabashed giveaways in some time, you can count the lawmakers on one hand who tried to bring some fiscal sanity to this legislation. This speed of this legislative train is increasing and very few lawmakers have the guts to stand in front of it.

Here are some descriptions of some of interested provisions in the
legislation:

1.Tobacco Buyout – $9.6 billion

The House legislation that would provide a $9.6 billion buyout for mostly-Southern State Tobacco Farmers. Specifically, the buyout would replace the old quota system created in the 1930s whereby tobacco farmers can buy growing quotas from the federal government. However, cheaper foreign tobacco has depressed tobacco prices and cause the federal government to decrease the quota level to the point where many tobacco farmers are leaving the business. There is near-unanimous support among farmers to destroy the system while simultaneously receiving $9.6 billion over a 5-year period that would “wean them off” the old quota/subsidy system.

2. Tax break on Archery products – $9 million

U.S. arrow makers now pay a 12.4 percent tax on arrow components manufactured in the United States. But arrow parts imported from overseas are not taxed. The measure would also eliminate the current 11 percent tax on so-called youth bows that are not powerful enough to be used in hunting. The current excise tax on broadheads, razor-sharp devices that can be attached to the tips of arrows, would be reduced from 12.4 percent to 11 percent. Rep. Paul Ryan (R-WI) is the leading proponent of this provision in the House. This provision is in the Senate legislation.

3. Fishing tackle boxes – $35 million

This provision would eliminate the excise tax on fishing tackle boxes. One of the biggest beneficiaries will be Plano Molding Co. of Illinois. The company, headquartered in House Speaker Dennis Hastert's district, has been making plastic fishing-tackle boxes for more than 55 years. In 1984, Congress created a special fund to help restore waterways and improve fishing. An 11 percent excise tax on fishing equipment, including tackle boxes, provides money for the fund.

Since Congress imposed the tax, sales of tackle boxes have dropped from a high of 60 million annually to 48 million, while sales of utility boxes have gone from zero to 100 million. A strong supporter of this provision is Rep. Jerry Weller (R-IL) a Ways and Means Committee member. Plano has three plants in Weller's district, and employs hundreds of workers.

4. Tax Break for Puerto Rican Rum – $169 million

Tax breaks for Rum produced in the U.S. Virgin Islands and Puerto Rico.

5. Treatment of aircraft leasing and shipping income – $995 million

This provision would exempt income from the active conduct of an aircraft- or vessel-leasing business from Subpart F under both the foreign base company shipping income rules and the foreign personal holding company rules. Shipping and aviation interests would benefit from the provision.

6. Extension of the Research and Development Tax Credit – $7.5 billion

The $7.5 billion tax break for research expenses would give an 18-month extension to a research and development (R&D) tax credit, originally established in 1981, which is scheduled to expire June 30. Efforts to try to get this in the bill were led by R & D Credit Coalition, which includes Microsoft, Pfizer, AT&T, Dupont and E-Bay.

7. Bonus depreciation of certain aircraft – $247 million over five years.

Enhanced depreciation provisions to help producers of small jets and planes, 60% of which are built in Kansas. Some of the companies that benefit include Lear Jet and Cessna. The provision modifies the definition of qualified property. The new definition requires that the aircraft's total cost exceed $200,000 and its development time exceed 4 months. The Internal Revenue Code provides that aircraft owners depreciate aircraft over a five-year life, while commercial operators must use a seven-year life. In the year of acquisition, an aircraft owner is normally entitled to depreciate the aircraft as though he or she acquired it in the middle of the year.

8. Repeal excise tax on sonar devices suitable for finding fish – $4 million

LED devices exempted from sonar devices suitable for finding fish. Not only are there tax breaks for catching fish, there’s a tax break for finding the fish as well.

9. Human clinical trial tax break -$198 Million
Expand human clinical trials expenses that qualify for the orphan drug tax credit. The credit, which was made permanent in 1996, applies to 50% of qualified clinical trial expenses incurred with respect to designated orphan drugs. The Orphan Drug Tax Credit only applies to qualified clinical trial expenses that are incurred after the U.S. Food and Drug Administration (FDA) officially designates the drug as an “orphan.” This proposal allows for an earlier tax break. 10. Tax treatment for livestock sold because of weather-related conditions – $27 million

The proposal extends the applicable period for a taxpayer to replace livestock sold on account of drought, flood, or other weather-related conditions from two years to four years after the close of the first taxable year in which any part of the gain on conversion is realized.

11. Tax treatment for bank director shares – $148 million

Enhanced tax treatments for shares owned by bank directors.

12. Tax Breaks for Alcohol – $428 million

A variety of tax breaks and credits for the liquor industry. It covered wine and beer and distilled spirits.

13. Suspension of duties on Ceiling Fans – $ 92 million

Suspends a $4.7% duty on ceiling fans, which Home Depot is one of the main beneficiaries. The $92 million dollar costs is taken from the JCT score from energy legislation.

14. Charitable contributions deduction for certain expenses in support of native Alaskan subsistence whaling.

15. Tax break for shipping companies – $68 million

Allows shipping companies to pay a tax based on the weight of items they ship, instead of paying the normal corporate income tax.