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Tax Cut Bill Has 'a Few Goodies' for Businesses

Wineries and other special interests hoping for a break in Senate measure could cost Treasury millions.

May 15, 2003|Richard Simon | Times Staff Writer

WASHINGTON — A bevy of businesses -- from wineries to the horse racing industry to bow-and-arrow makers -- are hoping to gain special benefits from the tax cut bill now being debated in the Senate.

Special-interest provisions of the bill stand to cost the U.S. Treasury hundreds of millions of dollars in lost revenue. But supporters of the provisions say they are aimed at helping small businesses and thus fit with the bill's goal of promoting job growth.

The provisions also illustrate how an issue, no matter how narrowly targeted, can move to the top of the legislative pile if attached to the right bill.

Keith Ashdown, vice president of policy for Taxpayers for Common Sense, a Washington-based fiscal watchdog organization, said most of the special-interest provisions would have "zero chance" of passing legislative muster on their own.

"The only way to get them through is to attach them to a 'must pass' legislative vehicle," he said, complaining that lawmakers are turning the tax code into a new vehicle for "pork-barrel politics."

Robert Bixby, executive director of the Concord Coalition, a budget watchdog group based in Arlington, Va., grumbled that the business tax breaks demonstrate that "even in the face of a record deficit, interest-group lobbyists can always be counted on to snag a few goodies in a major tax bill."

Earlier this year, some of the same special-interest provisions generated controversy when they were attached to a military tax-relief bill in the House. They were stripped from that legislation. But some, such as a tax break for makers of fishing-tackle boxes, were later approved by the House as part of a different bill.

Now, the Senate is considering some of the same items -- and a few new ones.

Ultimately, all the measures must be approved by House-Senate negotiators, who will meet to reconcile differences in the chambers' bills.

One provision of the Senate bill would repeal a century-old occupational tax on alcohol sales outlets and manufacturers.

Repeal of this tax has long been sought by business groups, such as the California-based Wine Institute and the National Assn. of Convenience Stores, which claim that the levy places an unfair burden on small wineries and mom-and-pop stores.

"With the slowdown of the economy, small businesses in particular feel this onerous tax burden," the National Beer Wholesalers Assn. and the American Beverage Licensees said in a letter to senators.

David Rehr, president of the beer wholesalers group, said: "If you consider a small business in America to be a special interest, sure, it's a tax break for special interests." But, he added, "it's about getting money into the hands of people who will use it to get the economy moving."

While Rehr regards the chances for repeal as "pretty good," the House did not include the provision in its tax relief bill.

And a key member of the tax-writing House Ways and Means Committee, who spoke on condition of anonymity, said House and Senate negotiators could balk at the tax's repeal because of its cost to the U.S. Treasury: $780 million over the next decade.

Currently, alcoholic beverage retailers pay an annual tax of $250 per store. Wholesalers pay $500 and manufacturers pay $1,000 per location.

Another provision of the Senate bill would repeal a 30% withholding tax on winnings from bets placed outside the country on U.S. horse races.

Sen. Jim Bunning (R-Ky.), who has pushed for repeal of this tax, called it "common-sense tax relief that will help encourage more participation from the international community in U.S. horse racing," raising revenue for tracks and horse owners.

If it is approved, repeal of this tax is expected to result in a revenue loss of $21 million over a 10-year period.

Although the horse racing measure was brought before the House but then dropped from consideration, Rep. Jim McCrery (R-La.), who has pushed for it, said he is optimistic that it will eventually succeed.

"It's an easy target, and I understand that," he said, "But for anyone who takes the time to explore the rationale for it, you will understand that it's good policy," McCrery said.

"There's no question that it will increase the take for American tracks, which will enable them to hire more people. "

Also in the Senate bill is a requirement that a tax paid by domestic arrow makers be extended to foreign manufacturers.

Supporters say the current law puts U.S. arrow makers at a competitive disadvantage, driving them to move their businesses and jobs overseas. That measure stands a good chance of being in the final bill, since the House has already approved a similar provision.

The Senate is also considering whether to exempt custom gunsmiths -- those making fewer than 50 guns a year -- from a firearms excise tax.

Sen. Max Baucus, the top Democrat on the tax-writing Senate Finance Committee, has pushed for the provision, citing the case of a "one-man shop" in his home state of Montana that must pay the tax. The projected revenue loss is $8 million over 10 years.

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