Corporate tax bill hits hurdle in Senate

The House approved the corporate tax bill 280-141 Thursday night with 73 Democrats supporting the bill.

Democratic support in the Senate is also expected to be substantial, given that the measure is chock-full of tax breaks designed to appeal to a wide array of interests.

But senators who support regulation of tobacco by the Food and Drug Administration are unhappy that this provision was stripped out of the measure by a House-Senate conference committee, which did retain a $10.1 billion buyout for tobacco farmers' Depression-era quotas.

Senator Edward M. Kennedy, a Massachusetts Democrat, complained that House Republicans on the conference committee had rejected the attempt by senators to keep FDA regulation in the bill, which they saw as critical to boosting efforts to keep children from becoming addicted to cigarettes.

The bill ''should have provided protection of America's children but the Republican leadership refused to do that," Kennedy said.

Senators were also upset about the removal of two other Senate provisions -- blocking implementation of overtime rules that opponents contend will deny millions of Americans overtime pay and providing a tax credit to companies that make up the lost pay of employees who are called up to serve in the National Guard or military reserve units.

Senator Mary Landrieu, a Louisiana Democrat, said the employer credit for bridging the gap between what workers earn in the military and what they earn in their civilian jobs would have cost $2 billion in a tax bill that included $136 billion in tax breaks for such interests as NASCAR racetrack owners, importers of Chinese ceiling fans, and some of the largest corporations in America.

''How can I go home and say I am sorry that we didn't have any money to hand out to our guard and our reserve," she asked.

The centerpiece of the tax legislation pending before the Senate would provide $76.5 billion in tax relief for the country's beleaguered manufacturing sector and other US ''producers" -- broadly defined to include construction companies, architects, engineering firms, film and music companies, and oil and gas companies.

The bill would also repeal a $5 billion annual tax break provided to American exporters that was ruled illegal by the World Trade Organization.

Ending the tax break is needed to lift retaliatory tariffs that have been imposed on US exports to Europe that now stand at 12 percent and are rising by 1 percentage point a month.

The bill replaces the export tax break with $136 billion in new tax relief over the next decade for an array of groups from small businesses to farmers and fishermen.

Residents of eight states that do not have a state income tax would get the ability to deduct state and local sales tax payments from their federal income taxes.

Opponents also have objected to $42.6 billion in tax relief for multinational corporations, which they contended would increase the movement of US jobs overseas.