House Passes Pro-Growth Tax Reforms
On June 17, the U.S. House of Representatives passed HR 4520, the American Jobs Creation Act of 2004, which repeals export subsidies found to be in violation of World Trade Organization (WTO) agreements.
The violation had provoked the European Union (EU) to impose tariffs on U.S. companies beginning March 1. Retaliatory tariffs have been levied on more than $4 billion of U.S. exports to the EU because the United States failed to comply with a 2003 WTO ruling on tax treatment of foreign income.
HR 4520 includes many additional reforms, and many observers predict the bill's passage will be an economic boon to many domestic industries, including small business, farmers, and technology companies.
"In addition to repealing the export subsidies, the legislation provides a net $34 billion tax cut over 10 years by cutting the corporate tax rate, extending small business expensing, allowing states with no state income tax to deduct their sales tax from federal taxes, and most importantly allowing companies to reinvest their foreign profits back into America at a lower tax rate," said Jonathan Collegio of Americans for Tax Reform (ATR). "The latter provision alone will generate $400 billion of new investment and create 500,000 new jobs over the next two years.
"Additionally, passage of the legislation starts the process for the Congress to pass, and President Bush to sign into law, the nation's fourth tax cut in as many years," noted Collegio. Bush signed into law the Economic Growth and Tax Relief Reconciliation Act in 2001, the Jobs Creation and Worker Assistance Act in 2002, and the Jobs and Growth Tax Relief Reconciliation Act in 2003.
A press release from Majority Whip Roy Blunt (R-Missouri) praised the bipartisan support for HR 4520, which passed by a vote of 251 to 178. "The economy has shown growth for nine straight months, adding more than 1.4 million new jobs," wrote Blunt. "This bill will sustain economic growth and provide incentives for America's job creators to hire even more American workers."
Added Blunt, "Currently, American companies and workers are at a competitive disadvantage. Reducing taxes on businesses of all sizes and eliminating these unfair penalties will help American manufacturers and farmers invest more in expanding operations and creating new jobs."
In a written statement, House Majority Leader Tom DeLay (R-Texas) said the American Jobs Creation Act will "create more jobs and opportunities for the American people, support our obligations to the World Trade Organization, and restore fairness to the tax code by reinstating the state sales tax deduction.
"This bill will keep American jobs in America," DeLay said. "It will encourage companies to manufacture more goods and keep more jobs in the United States while maintaining the global competitiveness of the American economy. The American Jobs Creation Act is another important step on the way to our goal of doubling the economy in the next 15 years."
Farmers to Benefit
Farmers will also benefit from new business tax provisions included in the act. According to the Iowa Farm Bureau, "the bill includes a two-year extension of small business expensing benefits set to expire after 2005, clarifies that farm income average does not trigger the Alternative Minimum Tax, and extends the replacement period for cattle sold because of natural disasters."
Rep. Mac Collins (R-Georgia) said there is good news in the legislation for America's tobacco growers and manufacturers as well. "Don't you just love it when a plan begins to come together," Collins told a Capitol Hill press conference after the vote. "Today we saw something on the floor of the House that we haven't seen since I have been here, that is both sides of the aisle competing for who had the best tax relief bill.
"The tobacco quota system has been drastically hurt because of domestic content and imports," said Collins. "We [just] passed the beginning of a plan to end the quota system. This legislation will totally rid American farmers and manufacturers of the tobacco quota system and will allow them to compete in a free and open market that will be free of government price controls, production limits, and guarantees."
The legislation allows for a $9.6 billion "buy-out" of the quota for tobacco growers in order to end the antiquated tobacco quota program.
While Collins was happy with the legislation's corporate tax reduction, he insisted rates must be cut further in order to generate jobs and improve the American economy. "Such tax relief is clearly needed. For some time now, to remain competitive in the global marketplace, our trading partners have been reducing tax rates on the businesses that employ their workers. Many countries, including Australia, Canada, France, Germany, Japan, Poland, and Turkey, have cut their corporate tax rates drastically--some by 10 percent or more," Collins said.
"This vote represents an important victory for the American economy, consumers, and businesses," Rhett Dawson, president of the Information Technology Industry Council, said in a statement. "The American Jobs Creation Act and the strong provisions it includes will boost job creation, spur economic growth and expansion, and help promote the global competitiveness of U.S. IT companies."
The Senate passed its version of the bill on May 11, 2004. The Bush administration has indicated that passage of the bill, after the two versions are reconciled by a House-Senate conference committee, is a top priority.
John Skorburg is managing editor of Budget & Tax News. His email address is email@example.com.