Grassley Advances Tax Relief for Manufacturers, Farmers, Plus Significant International Tax Reforms
WASHINGTON – Sen. Chuck Grassley, chairman of the Committee on Finance, today praised near-final approval of legislation to cut taxes for U.S. manufacturers, sole proprietors, partnerships, farms and small businesses that make products and create jobs, to reform and simplify international taxes for U.S. companies operating overseas, and to shut down abusive tax shelters thathave come to light over the last two years. The legislation is meant to head off more trade sanctionsfrom Europe on U.S. manufacturers and agricultural producers.
“This bill is a good solution,” Grassley said. “It’s not only the first step toward ending theEuro tax on America’s exports, but it also gives a real shot in the arm to U.S. factories and farmers,at home and abroad. This bill was three years in the making, and we need to finish the job. Everyday of delay means more sanctions freezing U.S. businesses out of the European markets, and morejobs in danger. We need to give permanent relief to the nation’s job creators and lift the sanctionsburden from our exports.”
Grassley was the lead Senate negotiator working on a House-Senate conference committeeto reconcile differences between each chamber’s bill. Today, the conference committee approveda final conference report, clearing it for consideration in each chamber later this week.Grassley wrote the Senate’s version of the bill, the Jumpstart Our Business Strength (JOBS)Act, which won Senate approval in May on an overwhelmingly bipartisan 92 to 5 vote and won thesupport of every committee Democrat in a 19 to 2 approval vote last October. The conferencecommittee’s final product mirrored Grassley’s legislation in many ways.
Grassley said the Foreign Sales Corporation/Extraterritorial Income Tax regime, in effect,lowers the rate of income tax imposed on goods that are manufactured in the United States andexported for sale in foreign markets. The purpose of FSC-ETI is to allow U.S. manufacturers tocompete with European manufacturers who do not pay value-added taxes on their exports. TheWorld Trade Organization has ruled that FSC-ETI is an impermissible export subsidy, and hasauthorized the European Union to impose up to $4 billion a year in sanctions on U.S. exports.According to media reports, the sanctions would be the largest in the WTO’s history.
Grassley said the today’s legislation repeals the current tax regime ruled out of complianceand replaces it with a system that would bring the United States into compliance. The bill reducesthe tax rate for U.S. manufacturing by three percentage points. These cuts are for all whomanufacture in America, regardless of their . Those eligible include sole proprietors,partnerships, and corporations of all , large and small, domestic and international, and evenforeign-owned companies that make things in the United States. “These benefits also extend tofarmers, miners, lumberjacks, and anyone else who manufactures, grows, or extracts products in theUnited States,” Grassley said.
The legislation also includes significant reforms to international tax rules, which Grassleysaid seriously undermine America’s ability to compete in the global marketplace. Grassley said thelegislation includes many international tax reforms that directly benefit manufacturers, such ascleaning up problems that cause foreign earnings to be double-taxed, and a series of provisions tobring foreign earnings back home for investment in America.
Grassley said the legislation provides billions of dollars (an updated cost is forthcoming) oftax relief but doesn’t add one dime to the present deficit. The tax relief is paid for in full by manyof Grassley’s initiatives to shut down abusive tax shelters, including those involving sewer lines andsubway systems, and attacking the abusive tax strategies used by Enron, unearthed during theFinance Committee’s Enron investigation, and other items. (A separate news release will have moredetail.)
Because of political delays, today’s action comes after the European Union’s sanctionskicked in on March 1. The sanctions began as a 5 percent Euro tax on U.S. exports and increase 1percent each month Congress doesn’t repeal the current tax regime. The sanctions reached 12percent this month, hitting more than 1,600 products, including jewelry, clothing, agricultural goods,timber, and paper.
“It’s important to remember that we’re not talking about faceless corporations,” Grassleysaid. “We’re talking about real people whose jobs hang in the balance. A guy who works at asawmill in Washington state or a dairy farmer in Wisconsin shouldn’t have to worry about Europeansanctions costing him his job. It’s up to Congress to fix this problem, and I’m glad we’re meetingthe challenge.”
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