It's going to be a long, hot summer in Washington as Senate and House negotiators try to reach compromise on two different bills that repeal illegal tax breaks, among other things.
The House bill, approved 251-178 yesterday, would repeal the Extraterritorial Income regime, which grants breaks to U.S. exporters. The World Trade Organization has ruled the regime an illegal subsidy and has allowed the European Union to retaliate by levying punitive tariffs on U.S. goods, the Wall Street Journal reported.
To compensate U.S. companies for the lost benefit and to nudge the economic recovery, the House bill reduces the top tax rate for manufacturers to 32% from the current 35% rate. Other breaks target multinationals and small businesses, all with the stated goal of creating jobs. The bill also includes a $10 billion buyout to tobacco farmers, the Journal reported.
The Senate's bill, passed last month, repeals the export tax break, but many obstacles stand between reconciliation of the two bills.
The House bill provides nearly $155 billion in benefits over 11 years; offsetting revenue increases reduce the net to $34 billion. The Senate bill provides about $170 billion in relief, all of which is offset by other provisions. The House bill is likely to be substantially modified in conference with the Senate, the Journal reported.
Senate Finance Chairman Charles Grassley (R-IA) has made it clear that no bill with a budget impact will get through his committee but House leaders are expected to reject any more revenue-raising tax and fee increases.
Not making it into the House bill was a Treasury Department request to force accounting firms to reveal the names of clients who bought tax shelters, the Journal reported, adding the provision was struck at the last minute.