Summary of the Thomas FSC/ETI Bill

For Immediate Release:

June 17, 2004

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The week of June 14th the House is considering H.R.4520, a modified version of H.R. 2896, Ways & Means Chairman Thomas’ bill to replace the FSC/ETI tax regime. GOP inaction on this matter prompted trade-related sanctions imposed by the European Union on a wide variety of US products (mainly agricultural, metals, machinery, and electrical equipment) that began March 1, 2004 and could eventually amount to $4 billion.  Thomas has ignored substantial bipartisan agreement in the House and Senate over how best to address this problem.

In fact, news reports indicate that Thomas actually expressed disappointment to E.U. Commissioner Lamy in November 2003 that the E.U. had delayed imposing sanctions, essentially hoping that the sanctions would create more urgency to pass his bill. In an effort to overcome two years of bipartisan opposition to his effort to increase incentives to move American jobs overseas, Chairman Thomas has cobbled together a variety of corporate tax breaks, extenders and other sweeteners that have nothing to do with reforming international tax law.   

THERE ARE MANY REASONS DEMOCRATS OPPOSE THOMAS’ BILL:

  • Continues to Push Tax Breaks for Overseas Investment and Jobs Abroad.  During a time of historic job loss in America, Thomas retains as the core of his bill $35 billion in incentives to U.S. firms to invest overseas.  The cost of these incentives rises when timing gimmicks are removed.
  • Adds to the Deficit.  At a time of historic deficits and without a realistic budget plan, instead of simply solving a $4 billion problem, H.R. 4520 includes nearly $150 billion in gross tax cuts with a net cost of $34 billion over the ten years.
  • Broad Corporate Tax Benefits rather than targeted US Manufacturing credit.  Thomas also chose to use revenue from repeal of FSC/ETI to provide a broad and complex tax break for large corporations (including those with international production), rather than more focused relief that would also benefit smaller manufacturers and farm cooperatives that create jobs and have production solely in the U.S.
  • Extraneous Provisions Likely Dropped in Conference.  In a speech to the Federation of American Hospitals this Spring, Chairman Thomas described his views on the legislative process: “The other thing that is really lousy about legislative bodies in a democracy is that everybody has the same vote.  So you have to take their interests into consideration if you want their vote, unless you can figure out a way where they think they’re getting something and they’re not, but that only happens once usually.”   Thomas is employing this strategy with extraneous provisions such as tobacco buyout and the deductibility of state sales taxes, both of which are scaled-back versions of proposals that Democrats in certain states have supported, and are unlikely to be supported by GOP conferees.
  • Holds important and popular tax extenders hostage.  A one-year extension of the R&D Credit, wind and renewable energy credits, and welfare to work credits are among $14 billion in extenders that have been purposely delayed so Thomas can use them as cover for his cause.
  • Controversial revenue raisers on individuals used to offset cost of corporate tax incentives. Buried in the fine print of Thomas’ 400-page bill are provisions to outsource IRS debt collection, create additional paperwork for charitable contributions and only nominal punishment of companies and individuals that expatriate in order to avoid taxation.