WASHINGTON — Congressional negotiators agreed Wednesday on a nearly $140-billion, 10-year corporate tax overhaul that also sought to end a Depression-era tobacco quota and price support program.
The measure, which offers $10 billon in payouts to growers in return for the end of their tobacco supports, is expected to be approved by the House as early as today. It could face trouble in the Senate, however, because it no longer includes a provision to give the government new powers to regulate the sale, distribution and advertising of cigarettes and other tobacco products.
Congress is under pressure from corporations, which are eager for the tax cuts, to pass the bill before adjourning at the end of this week. Adding to the pressure, the tobacco buyout has become a hot issue in the Senate race in North Carolina, which is critical to the control of the chamber.
The measure was originally drafted in response to the European Union's levying of sanctions on 1,600 U.S. goods, from California produce to North Carolina textiles, after the World Trade Organization declared a U.S. export tax break to be an illegal trade subsidy. The retaliatory tariffs, which began in March at 5%, have been rising by 1 percentage point a month and now stand at 12%.
The massive bill would repeal the export tax break and replace it with other tax breaks, including one for the manufacturing sector, which has been hard hit by job losses. The bill would also effectively reduce the top corporate tax rate from 35% to 32%.
It also includes tax breaks that would benefit a range of narrower interests, such as the horse racing industry, NASCAR racetracks, bow-and-arrow makers and stores that sell alcoholic beverages.
The bill is also loaded with tax breaks benefiting key lawmakers' home-state interests. Two Senate incumbents facing tough reelection fights won breaks for their constituents: Farm-state lawmaker Tom Daschle, the Democratic minority leader from South Dakota, got one for the ethanol industry, while Lisa Murkowski (R-Alaska) won a break designed to spur building of a trans-Alaska gas pipeline.
The bill also includes a provision pushed by House Majority Leader Tom DeLay (R-Texas) that would allow residents of seven states without state income taxes -- Texas, Florida, Washington, Nevada, South Dakota, Wyoming and Tennessee -- to deduct sales taxes from their federal income tax.
