Rewrite Proposed on Global Tax Rules
Byline: Jeffrey Sparshott, THE WASHINGTON TIMES
The House's top tax lawmaker yesterday proposed a major rewrite of international tax rules and a new $120 billion, 10-year corporate-tax cut.
The proposal follows a World Trade Organization ruling that U.S. tax breaks for exports are illegal subsidies.
The 15-nation European Union, which brought the case, won the right to retaliate with $4 billion in trade sanctions and has threatened to start them Jan. 1. Lawmakers and companies are using the threat as an opportunity to rework rules and offer new tax breaks.
"If we show significant progress, I believe we can stave off that date [for retaliation]," said California Republican Bill Thomas, chairman of the House Ways and Means Committee and author of the new bill.
Mr. Thomas' legislation splits corporate America and competes with a proposal written by Rep. Philip M. Crane, Illinois Republican, and Charles B. Rangel, New York Democrat, and co-sponsored by 134 other lawmakers.
Legislators and the Bush administration agree they must repeal the illegal tax breaks, worth about $50 billion over 10 years. But they have not agreed how to reallocate that $50 billion, who should benefit most and how to revamp Kennedy-era laws on international corporate taxes.
Mr. Thomas' main goal is to simplify international tax law for U.S. companies that earn income abroad.
Provisions are designed to ease regulations that force companies to set up large bureaucracies or additional entities to deal with separate U.S. and foreign tax laws, end measures that effectively make companies pay taxes twice on foreign income, reduce the number of ways income has to be classified, and penalize American companies that move offshore.
The legislation also would help companies with less than $10 million in taxable income by reducing their corporate-tax rate to 32 percent, 3 percentage points lower than the current top rate. The reduction would apply to more than 99 percent of all businesses, Mr. Thomas said.
Other major incentives include a faster schedule for depreciation on equipment and improvements, and an expanded research and development-tax credit.
"This is about jobs, domestic jobs," Mr. Thomas said.
More than 120 multinational companies, including Coca-Cola, General Motors and Wal-Mart have joined a coalition to back Mr. Thomas' proposal.
"We support Chairman Thomas' legislation because it recognizes the fundamental connection between international competitiveness and the ability of U. …