Senate Rejects Corporate Tax Cut

On March 24, by a vote of 51 to 47, the Senate failed to invoke cloture and end debate and bring to a vote a bill that would strengthen American jobs by giving corporate tax breaks to U.S. manufacturers (S. 1637). Three-fifths of the Senate (60 votes) is needed to invoke cloture. The bill would have repealed export subsidies that have been found illegal by the World Trade Organization and replaced them with corporate tax breaks aimed primarily at helping American manufacturers and exporters. This matter gained urgency when the European Union began imposing penalties on selected U.S. products that can gradually rise to $4 billion by next year.

In order to allow Americans to function competitively in the jungle of international trade, Republicans in the Senate have now tried twice to encourage passage of this bill, but Democrats have resisted.

This congressional impasse over legislation to avoid costly trade sanctions is only hurting American jobs, said Sen. Charles Grassley (R.-Iowa), and will continue to do so until it is passed. And for senators who really care about the economy, this is bad news.

In typical John Kerry fashion, Democrats claimed to support the corporate tax bill, even as they voted against it. As with welfare reform, (see below) they killed the bill when Republicans refused to consider unrelated amendments, especially one that would block the White House from imposing a new overtime rule that allows workers to choose vacation time in lieu of time-and-a-half for work beyond 40 hours per week.

"It is that crucial to the American worker that this Senate express itself once again and say no to the administration, that we are not going to let them trample on the rights of American workers and take away their right to overtime pay if they work over 40 hours a week," said Sen. Tom Harkin (D.-Iowa). Harkin said he was affronted by the Bush Administration's audacity in proposing a new set of rules without a public hearing. "If the other side believes that somehow by going through this charade and slowing this bill down and somehow blaming us for it when we are not doing this is somehow going to get rid of this overtime amendment, well, I am sorry to disappoint them," Harkin said.

Grassley countered that the bill would invoke domestic tax relief and international tax reforms - all in the effort to strengthen business and job creation, but his arguments held little sway, since Democrats hope to benefit from poor economic conditions in the November elections.

In the midst of numerous jobs heading overseas, Grassley stressed that the bill would abolish the Foreign Sales Corp (FSC).

The FSC, which protects American manufacturers by granting income tax cuts on exported items, was determined to be contrary to international trade agreements, said Grassley. The European Union claims it is an illegal export subsidy. In order to appease the EU and avoid a trade war, the old system needs to be replaced or else many good-paying jobs would be in jeopardy.

Currently, the EU tariffs are set at 5%, but they will rise by 1% each month until America complies with the EU, up to 17%. If this happens, Democrats will gleefully complain of all the jobs lost, despite their own responsibility for killing this bill.

Sen. Bill Frist (R.-Tenn.), as majority leader, changed his vote to oppose the cloture motion because that allows him to re-introduce it later. However, when he did so, the Senate failed again to invoke cloture on April 7, with similar results, 50 to 47.

A "yes" vote was a vote for cloture, and, in effect, a vote in favor of the bill to provide tax breaks to allow U.S. manufacturers to trade fairly overseas. A "no" vote was a vote against cloture, and was, in effect, a vote against the bill. Sixty votes were needed to invoke cloture.

NOT VOTING: 2