Zachary Coile
Chronicle Washington Bureau
October 3, 2008
While crafting a bill intended to rescue the U.S. economy this week,
lawmakers couldn't stop themselves from adding billions of dollars in
tax breaks that have little to do with restoring confidence in
financial markets.
Senators quietly tucked a number of earmarks into the tax package of
the 451-page bill that was passed Wednesday night and is expected to be
put to a vote in the House today: a $2 million tax benefit for makers
of wooden arrows for children; a $100 million tax break to benefit auto
racetrack owners; $192 million in rebates on excise taxes for the
Puerto Rican and Virgin Islands rum industry; $148 million in tax
relief for U.S. wool fabric producers; and a $49 million tax benefit
for fishermen and other plaintiffs who sued over the 1989 tanker Exxon
Valdez spill.
Many of the tax breaks were put in place years ago and were set to
expire. But their inclusion is complicating efforts in the House to
pass an economic rescue plan; an earlier attempt failed Monday. Several
House Republicans railed on Thursday against the pork-packed bailout
bill.
"One thing we didn't appreciate in the Senate's action was that they
decided that this bill should become Christmas in October," said Steven
LaTourette, R-Ohio. "We just don't think (the earmarks) should be in
this piece of legislation."
The tax earmarks were scarcely noticed during the Senate debate over a
bill that featured a $700 billion bailout package and a $112 billion
tax package, including the renewal of popular tax breaks for businesses
and renewable energy projects and a one-year effort to shield at least
20 million Americans from paying the alternative minimum tax.
Broad support
The bill was approved easily, 74-25, winning support even from
lawmakers who have crusaded against earmarks - including Arizona Sen.
John McCain, the Republican Party's presidential nominee, who warned
last week that he might oppose a bailout bill if it included more
pork-barrel spending.
"It is completely unacceptable for any kind of earmarks to be included
in this bill," he said in a speech in Freeland, Mich. "It would be
outrageous for legislators and lobbyists to pack this rescue plan with
taxpayer money for favored companies. This simply cannot happen."
On MSNBC's "Morning Joe" program Thursday, McCain was pressed on why he
voted for a plan that included earmarks that he strongly opposed. He
said he had to support the bill because the country is "on the brink of
economic disaster."
"There were plenty of other bills that I fought against, voted against" because of pork, McCain said.
The tax earmarks were championed by both sides of the aisle. Western
lawmakers, especially Sens. Ron Wyden, D-Ore., and Larry Craig,
R-Idaho, backed an expansion of a program that helps pay for rural
schools. Lawmakers from states with no income tax backed an extension
of a program that allows residents in states including Texas, Nevada,
Florida, Washington and Wyoming to deduct the sales tax they pay over a
year from their federal taxes, a provision that costs the Treasury $3.3
billion over two years.
Benefit for film producers
Even Hollywood got something out of the Senate bill: renewal of a tax
incentive worth nearly $48 million a year for film and TV producers who
produce their work in the United States.
The earmarks are not exactly new. They were passed by the Senate on
Sept. 23 on a 92-3 vote (McCain and his Democratic rival, Barack Obama,
were absent) for a tax package costing more than $100 billion. House
Democratic leaders opposed the Senate's tax plan because it wasn't
fully paid for and will add to the federal deficit.
Steve Ellis, vice president of Taxpayers for Common Sense, the
congressional watchdog group that tracked the earmarks in the bill,
said Senate leaders had two main objectives in strapping the tax
package to the financial bailout plan.
"One is they're hoping this will turn a few votes, that people who
support some of these provisions will forget about the $700 billion and
concerns they may have on that, and say, 'If you give me a few million
in tax breaks for my constituents, I'll go along,' " Ellis said. "The
second reason is that this is your standard, run-of-the-mill,
end-of-year politics. You take a piece of must-pass legislation, you
cram whatever you want in there and you dare the House to oppose it.
It's really a pretty cynical maneuver."
The tactic might have helped pass the plan in the Senate, but it's
making life tougher for House leaders. The House narrowly defeated the
bailout plan 228-205 Monday, and lawmakers now must flip at least 12
votes to change the outcome.
House Blue Dogs are complaining about the costs of the tax package.
Republicans are unhappy at what they see as an attempt to sneak pork
into the bill. Rep. David Hobson, R-Ohio, voted for the bill but said
he's now undecided. "I hope other people who voted yes may be
reconsidering where they are when they get the outrage of the pork
barrel projects," he said.
Measured optimism
But leaders of both parties said Thursday they are cautiously
optimistic the measure will pass. Several lawmakers indicated they were
ready to switch from "no" to "yes" votes, including Republican Reps.
Ileana Ros-Lehtinen of Florida and Zach Wamp of Tennessee. Rep. Roy
Blunt, R-Mo., the GOP's top vote-counter, predicted the measure would
pass.
House Speaker Nancy Pelosi said she won't put the financial rescue bill
on the floor unless it's clear it will pass, hoping to avoid a repeat
of Monday's embarrassment, when the bill failed a day after party
leaders had announced a deal.
But she added, "I'm optimistic that we will take a bill to the floor."
Tax breaks in bailout bill
The financial rescue measure passed by the Senate on Wednesday included
a series of tax incentives benefiting specific industries or states.
Wooden arrows: This tax break, backed by Oregon's two senators, would
benefit an Oregon manufacturer of wooden arrows for children by $2
million over 10 years.
Racetracks: Earmark would allow auto racetrack owners to depreciate
their facilities over seven years, saving the industry $100 million
over two years.
Rum: Offers rum producers in Puerto Rico and the Virgin Islands a rebate on excise taxes worth $192 million over two years.
Wool: Reduces tariffs for U.S. makers of wool fabric that use imported
yarn, worth $148 million over five years. The measure was pushed by
Reps. Louise Slaughter, D-N.Y., and Melissa Bean, D-Ill.
Exxon Valdez: Plaintiffs in the suit over the 1989 oil spill could
spread their tax payments on punitive damages over three years, cutting
their tax bill by $49 million. The measure was backed by Rep. Don
Young, R-Alaska.
American Samoa: Allows certain corporations to reduce their tax
liability on income earned in American Samoa, at a cost of $33 million
over two years.
Hollywood: Extends a tax break for film and TV companies that keep
their production in the United States, worth $478 million over 10
years. The provision was originally pushed by Rep. Diane Watson, D-Los
Angeles.
