Senate Passes Corporate Tax Cuts

WASHINGTON – The Senate threw its support behind a tax cut for American manufacturers, urging the House to follow its lead and head off punishing tariffs (search) that creep up every month.

The tariffs, imposed by the European Union (search), retaliate against the United States for failing to rid a domestic tax break deemed an illegal export subsidy. Senators said they hoped their 92-5 vote on Tuesday gives the bill a jolt that will help it move through the House.

"It is imperative that the House of Representatives act quickly," said Senate Minority Leader Tom Daschle, D-S.D. "The American people can't wait any longer for legislation that encourages companies to keep their jobs in the U.S."

The Senate bill goes beyond a simple fix to end the trade dispute. During months of debate, senators added parts that block the Bush administration from rewriting overtime pay regulations (search) to strip the benefit from workers and prohibit federal contractors from using tax dollars to contract work overseas.

Lawmakers also folded in $14 billion in energy production incentives, a pile of expiring tax credits and a short-term tax break meant to encourage companies to bring home income accumulating abroad.

At its core, the Senate bill would cut taxes for American manufacturers, rewarding most to those companies that produce their goods at home. The entire package cuts taxes $170 billion over a decade, including some new and old tax cuts.

Lawmakers cover the cost of the package with money recouped from the repealed tax break for exporters and an assault on corporate tax shelters and loopholes.

"Since we're giving tax relief to companies and small businesses, it's only fair that we tighten the law for those avoiding their fair share," said Senate Finance Committee Chairman Charles Grassley, R-Iowa.

One of the biggest changes raises $39 billion by blocking companies from generating immediate tax deductions by leasing and writing off the depreciated value of foreign and domestic public works, such as bridges, buses and trains.

The bill also would adjust tax rules for multinational corporations.

Senators voted 74-23 to keep those new tax rules, which Senate tax-writers said reduced double taxation of companies that operate in the United States and abroad. Adjustments to international taxation proved a serious obstacle in the House.

The Senate bill overcame its last major hurdle Tuesday when lawmakers agreed to vote on an amendment extending federal unemployment insurance benefits.

Democrats pressed hard for the election-year vote on assistance to unemployed workers, but on a 59-40 vote in the GOP-controlled Senate, they fell just shy of the 60 votes needed to overcome opposition. Critics had argued that extending the benefits violated the budget.

Massachusetts Sen. John Kerry, the presumptive Democratic presidential nominee, was the only senator who missed the vote. He was campaigning Tuesday in Kentucky.

The amendment would have offered emergency federal unemployment benefits (search) for six months, temporarily giving 13 weeks of extra assistance to people who exhaust their state benefits — typically 26 weeks.

"I thought it was going to be very close," said Sen. Maria Cantwell, D-Wash., the amendment's sponsor. "I thought it was going to be within a vote."

In a flurry of last minute changes, senators tacked on a tax credit for pollution control equipment installed at ethanol production (search) facilities, a 50 percent tax credit to offset the cost of creating closed captions for movies, an optional Medicaid benefit for treating sickle cell disease (search) and a tax cut for capital gains income on gold, silver, platinum and palladium.