WASHINGTON — With no fanfare, President Bush on Friday signed the most sweeping rewrite of corporate tax law in nearly two decades, showering $136 billion in new tax breaks on businesses, farmers and other groups.
Intended to end a bitter trade war with Europe, the election-year measure was described by supporters as critically necessary to aid beleaguered manufacturers who have suffered 2.7 million lost jobs over the past four years.
But opponents charged that the tax package had grown into a massive giveaway that will add to the complexity of the tax system and end up rewarding multinational companies that move jobs overseas.
There was no ceremony for the bill-signing. White House press secretary Scott McClellan announced the signing on Air Force One as Bush flew to a campaign appearance in Pennsylvania.
The original purpose for the legislation was to repeal a $5 billion annual tax break provided to American exporters that was ruled illegal by the Geneva-based World Trade Organization. Repeal of the tax break was needed to lift retaliatory tariffs that are now being imposed on more than 1,600 American manufactured products and farm goods exported to Europe.
The bill replaces the $49.2 billion export tax break with $136 billion in new tax breaks over the next decade for a wide array of groups from farmers, fishermen and bow and arrow hunters to some of America's largest corporations.
The legislation also includes a $10.1 billion buyout of quotas held by tobacco farmers. However, a Senate provision that would have coupled this buyout with regulation of tobacco by the Food and Drug Administration was dropped by the conference committee that ironed out differences between the two chambers.
The measure is the most sweeping overhaul of corporate tax law since 1986. It provides a wide range of tax benefits for native Alaskan whalers, importers of Chinese ceiling fans and NASCAR race track owners.
The centerpiece is $76.5 billion in new tax relief for the battered manufacturing sector, but manufacturing is broadly defined to include not just factories but also oil and gas producers, engineering, construction and architectural firms and large farming operations.
The bill was seen as must-pass legislation because it repeals a $5 billion annual subsidy for U.S. exporters that has been ruled illegal by the World Trade Organization. Because of that ruling, 1,600 American exports to Europe have been hit by penalty tariffs that now stand at 12 percent and are rising by 1 percentage point a month.
In addition to the $76.5 billion in tax relief for manufacturing, the measure would also provide $42.6 billion in tax relief to multinational companies.
Supporters argued that the tax relief for multinational corporations would boost the competitiveness of U.S. companies, but opponents argued that it would simply provide more tax benefits to support the movement of U.S. jobs overseas.
To pay for the $136 billion total of new tax relief over the next decade, the legislation would rely on the savings from repealing the export subsidy and would close corporate loopholes and tax shelters — thereby raising an estimated $82 billion over the next decade.