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Action on Smoking and Health
A National Legal-Action Antismoking Organization Entirely Supported by Tax-Deductible Contributions
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Boston Globe Editorial: Tobacco/Tax Bill Should Not Be Passed [10/07-6]
Excerpts from: Tax code conflicts
Boston Globe [10/07/04]
The Republican leadership in Congress can't stop messing up the tax code.
After arranging a supposed middle-class income tax tilted toward the wealthy, it
is trying to ram through a bill that in the interest of solving one simple
problem would favor tobacco farmers and other special interests and could cost
$80 billion over 10 years. The bill should not be passed.
The legislation's origins lie in retaliatory tariffs imposed in March by the European Union on a range of US products. Congress ought to have quickly approved a bill to eliminate the US export subsidies that offended the Europeans and that had been ruled illegal by the World Trade Organization. Instead it dithered for months, and finally a House-Senate conference committee produced a bloated bill yesterday.
The item getting the most attention would pay tobacco farmers for ending federal support payments. Senator Kennedy wants to tie this buyback to a provision that would restore the regulation of tobacco by the Food and Drug Administration. Tobacco is a powerful drug, and the link is justified. But tobacco has nothing to do with export subsidies, and the conference committee has stripped Kennedy's plan from the bill.
The buyback would cost $10.1 billion over 10 years, dwarfed by the cost of other tax breaks congressmen have added for favored industries. One purports to provide relief to hard-pressed manufacturers, but it is so broadly worded that it could apply to companies that face no foreign competition, including the movie industry. The bill would also attempt to get companies to repatriate profits earned from foreign operations, thus making them subject to federal taxes, but would offer a temporarily low 5.25 percent rate instead of the present rate, which can be as high as 35 percent. This would encourage companies to move their money around to take advantage of the low rate, probably resulting in a loss of tax revenue.
This information is based on a preliminary analysis by the Center for Budget and Policy Priorities. The bill is supposed to be revenue-neutral, but the center figures it would actually cost $80 billion if some tax cuts that are supposed to be temporary are extended for the full 10 years of the analysis. The country can hardly afford this extravagance when the deficit exceeds $400 billion a year. Leaders in Congress hope to move the legislation through by the weekend so members can return to their districts for the final weeks before the elections. Kennedy is thinking of filibustering the bill to force Congress to consider it anew in its lame-duck session after the elections. He wants the FDA provision restored, but the lawmakers' focus should be on ending the export subsidy, not on extraneous provisions
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