the nation's attention was riveted on the presidential vote recount in Florida, on November 15th President Bill Clinton quietly signed a new law that means tens of billions of dollars in tax breaks for a select group of major corporations. The new law, "The FSC Repeal & Extraterritorial Income Exclusion Act of 2000," offers an estimated $62 billion in tax relief over the next decade to Boeing Company, General Electric, Monsanto, RJR Nabisco and other companies that are major exporters -- and major campaign contributors here at home. It passed the Senate on November 1st and the House on November 14th.
Thanks to an earlier version of this tax break, Boeing Co. saved $685.5 million in U.S. taxes between 1991 and 1998, 10 percent of its net income during those years, according to Tax Notes, a trade publication. In the 2000 elections, the company's executives and PAC have given some $1.5 million in hard and soft money to federal candidates and parties, 56 percent to Republicans, 44 percent to Democrats. General Electric saved $746.0 million between 1991 and 1998. In the current election cycle, GE gave $1.5 million in campaign contributions, 64 percent to Republicans.
These companies plus a half dozen others that altogether saved $2.6 billion between 1991 and 1998 contributed a total of $6 million to federal campaigns in the 2000 elections, 63 percent to Republicans. This bipartisanship in campaign contributions -- maybe it's better called "buy-partisanship" -- surely helped smooth passage of the bill in a Congress where partisan battling is so fierce right now that funding for major government agencies is still stalled.
The new law is a rewrite and expansion of one dating back to the Nixon Administration, which allows U.S. corporations to shelter 15 to 30 percent of their export profits from taxes. Last year alone, corporate use of the rapidly growing tax break cost taxpayers $3.9 billion, according to the U.S. Treasury Department. That's enough money to pay the salaries of 100,000 teachers for a year, or to put a computer in 1.5 million classrooms.
Last year, the World Trade Organization (WTO) responded to a European Union complaint that scheme was an illegal tax subsidy for U.S. multinational companies by ruling that as of October 1, 2000, the European Union could impose 100% tariffs on U.S. exports, unless the U.S. changed or repealed the law. But the new version of the tax break is no more pleasing to the Europeans than the old one. In response, they have already asked the WTO to approve some $4 billion a year in trade sanctions against the U.S.
It is not clear how this international trade feud will end. But one thing is clear -- if you have a million dollars or so to spare, then you might want to think about investing it in Congress and the president. Then, come tax day on April 15, you will reap great dividends.
December 18, 2000 (http://www.monitor.net/monitor) All Rights Reserved. Contact firstname.lastname@example.org for permission to use in any format.
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