Mr. Chairman, I respectfully request that the Rules Committee grant a Rule for the consideration of H.R. 4520 that would allow me to offer a substitute amendment and would waive any potential points of order against that amendment.
There are many reasons I oppose H.R. 4520 as it was reported from the Committee on Ways and Means. Rather than working in a broadly bipartisan manner to repeal and replace our country’s Foreign Sales Corporation – Extraterritorial Income export regime so the Europeans do not impose $4 billion per year in trade sanctions, Chairman Thomas has presented this Congress with a $150 billion bill that increases the deficit by over $34 billion. It is a $150 billion solution to a $4 billion problem.
I believe this bill may create more jobs, but they will not be American jobs. The manufacturing benefit in this bill also does too little for U.S. producers, hurts farmers, and stiffs small business.
In addition, instead of simplifying the tax code or pulling it up by its roots, this bill’s 424 pages add fertilizer to today’s briar patch tax code. It includes a multitude of unrelated add-ons from new excise tax rules for bows and arrows to outsourcing overdue tax collections to private debt collectors.
Rather than list all my concerns in detail, I will describe the alternative I hope you will allow me to offer under the Rule.
Since rumors abound that this bill may not be brought before the House until next week and that a Manager’s Amendment may be offered, let me be clear that the amendment I am submitting is based on the bill as reported, coming before the House. If the bill is further modified, I would respectfully request that I be allowed to modify my proposed alternative, in consultation with my Leadership.
My amendment is a simple solution that is consistent with the bipartisan Crane-Rangel-Manzullo-Levin legislation on this topic. It would focus its relief on domestic producers. It replaces the part of the tax code that the Europeans find objectionable with a 10% (3½ points) tax cut for all domestic production. It complies with our trade commitments AND preserves American jobs. It is simple, does not add to the deficit, and when introduced by myself, Mr. Crane, Mr. Manzullo, and Mr. Levin, picked up more than 150 co-sponsors roughly evenly divided between Republicans and Democrats.
The major differences between my amendment and the Committee-reported bill are the following –
A) The amendment provides a larger general domestic tax benefit that applies to all manufacturers and domestic producers regardless of whether they are organized as taxable corporations or subchapter S corporations, farm coops, or other unincorporated businesses. Small businesses will receive far more benefits from my amendment than under the Committee-reported bill.
B) The amendment does not include the additional tax incentives provided in Title III of the Committee-reported bill for companies to move jobs and operations offshore. The nonpartisan Congressional Research Service, in a recent report, stated that our current system already provides incentives for companies to shift capital out of the United States to take advantage of low taxes overseas. The Committee-reported bill will only increase the incentives provided by current law.
C) The amendment provides a permanent deduction for state and local general sales tax. The amount of the deduction would be computed under pre-1986 law. Unlike the Committee-reported bill, the provision would be permanent, it would not limit the deduction to the amount determined under a table and it would not be subject to a cap.
D) The amendment is also revenue neutral, using a series of offsets, many of which are included in the Committee-reported bill or in the Senate-passed bill. The amendment would prevent corporations from putting profits before patriotism in that it would eliminate the tax avoidance transaction of moving your corporate charter overseas.
E) The amendment drops many unrelated special tax breaks within the Committee’s jurisdiction.
The amendment includes the small business expensing and subchapter S reforms and an extension of the expiring provisions identical to that contained in the Chairman’s mark. It also includes a temporary incentive to reinvest foreign earnings in the United States.
Since President Bush took office, this country has lost 2.7 million manufacturing jobs. It would be wrong for this Congress to make that problem worse.
This is a common sense amendment that does not worsen our deficit picture and provides positive incentives for companies to locate in the United States.
Thank you for considering my request.
Summary of Rangel Amendment to H.R. 4520, FSC/ETI
The Rangel amendment strikes the reported bill except Title VII and inserts the following provisions:
1. The amendment would repeal the exclusion for extraterritorial income, effective January 1, 2005. The amendment contains binding contract relief and general transition relief that retains 80% of the benefit for 2005 and 60% for 2006.
2. The amendment provides a deduction for a portion of the income attributable to U.S. production activities. U.S. production activities are defined as activities in producing goods that were eligible for the FSC/ETI benefits if exported. This includes movies and software. The deduction applies to both corporate and non-corporate taxpayers. The deduction is phased in, ultimately reaching 10%. As a result, there is a 10% across-the-board rate reduction for income from these productive activities for both corporate and non-corporate taxpayers. Taxpayers at the maximum tax rate will receive a 3.5 point reduction.
3. The Rangel amendment extends the current level of small business expensing identical to the extension included in the reported bill. The amendment also includes all of the subchapter S corporate reform and simplification changes that are contained in reported bill.
4. The Rangel amendment extends the research credit and other expiring tax provisions in a form identical to that included in the reported bill.
5. The Rangel amendment includes a permanent deduction for State and local general sales taxes. Taxpayers would have the election of deducting income taxes or sales taxes. The amount of the deduction for sales taxes would be computed under pre-1986 laws. It would not be limited to the amount determined under a table, as in the reported bill, and it would not be subject to a cap, as in the reported bill.
6. The Rangel amendment includes a temporary reduction in tax on repatriated earnings identical to the provision in the Senate bill.
7. The Rangel amendment is revenue neutral and includes the following offsets:
A. The tax shelter provisions adopted on a bipartisan basis by the Senate.
B. Permanent extension of IRS and custom user fees identical to provisions in the reported bill.
C. Provisions preventing corporations from avoiding tax by reincorporating overseas.
D. Provisions preventing individuals from renouncing their citizenship for tax avoidance purposes identical to the provisions passed by the Senate.
E. Restructuring ethanol incentives identical to provisions in the reported bill.
F. Provisions addressing fuel tax evasion identical to provisions in the reported bill.
G. Provisions adding two vaccines to the list of taxable vaccines, identical to provisions in the reported bill.
H. Provisions preventing foreign entities from avoiding U.S. taxes through treaty-shopping.