American Jobs Creation Act of 2004-Conference Report

AMERICAN JOBS CREATION ACT OF 2004-CONFERENCE REPORT

Mr. REED. Mr. President, this week, a conference committee filed its report on legislation that was originally designed to repeal provisions in the tax code that have been found by the World Trade Organization to be illegal export subsidies. Months ago the European Union began imposing retaliatory tariffs on select American exports, including such important Rhode Island exports as machinery and jewelry. The targeting of the jewelry industry is especially troubling because Rhode Island is among the three biggest jewelry-producing States, and this sector accounts for 36 percent of the total trade targeted by the retaliatory duties. Without congressional action to repeal these export tax provisions, these tariffs would grow progressively until reacing 17 percent by March of 2005.

Unfortunately, I have serious concerns that the conference agreement before us today would not even provide immediate relief to our jewelers and other businesses targeted by these tariffs. The Senate-passed JOBS Act included a carefully crafted transitional benefit for those firms currently receiving FSC/ETI assistance. However, the bill before us includes transitional relief that is still export-contingent and could be challenged by the EU as still not being WTO-compliant. In fact, according to an article yesterday in the Washington Post, EU spokesman Anthony Gooch suggested that this legislation would not accomplish its central goal of lifting European sanctions due to the transitional assistance. This is the reason we have this legislation in the first place, and I am disappointed that the House conferees have potentially set up a repeat of tariffs on our Nation's domestic manufacturers and exporters.

That brings me to the other compelling reasons for the original JOBS Act: the bill, as passed by the Senate, replaced the Foreign Sales Corporation and Extraterritorial Income regimes with a more robust set of incentives for domestic manufacturing. At a time when domestic manufacturing, long the backbone of the American economy, is bleeding prized jobs to foreign countries, it is incumbent on Congress to put forward a responsible economic plan and provide important assistance to manufacturers that keep their operations here in the United States.

While the conference agreement does include a tax deduction to provide assistance to a broad-based group of manufacturers, unlike the Senate-passed legislation, it does not make a distinction between manufacturing domestically or abroad. It removed the so-called "haircut" that would have provided an incentive for companies to do their manufacturing here at home instead of shipping it abroad. Yet again, we see that House Republicans are unwilling to stand up for those manufacturers, small and large, that have kept their operations here in the United States.

In fact, if we look at the bill as a whole, we see that of the broad-based tax incentives, a larger net amount of money would be dedicated to international provisions than those targeted at production here at home. It is difficult to reconcile the very real challenges facing domestic manufacturers with the inclusion of huge tax breaks for multinational corporations. Ultimately, providing tax breaks to multinationals means that manufacturing jobs are going overseas.

The corporate repatriation provisions in H.R. 4520 are responsible for a significant amount of these costs, but there is little evidence that they will ultimately help to create jobs. Even Secretary Snow, speaking for the Administration, seemed to understand this inequity. He wrote in a letter to Chairman GRASSLEY, and I quote:

[T]he Administration also has concerns regarding the fairness of the repatriation provision included in both bills. This provision would offer international corporations a partial "tax holiday" for repatriating foreign income that is currently held overseas. U.S. companies that do not have foreign operations and have already paid their full and fair share of tax will not be able to benefit from this provision. Moreover, the Council of Economic Advisers' analysis indicates that the repatriation provision would not produce any substantial economic benefits. The Administration believes the $3 billion revenue cost of
this provision could be better used to reduce the tax burden of job creators in the United States.

This is not the only place where this bill failed to live up to its full potential to help domestic manufacturers. I am deeply disappointed several months ago that last-minute lobbying by multinational corporations were effective in removing from the Senate bill a commonsense provision to help reduce offshore outsourcing termed contract manufacturing.

Similarly, House Republicans voted to leave out the Dodd offshoring amendment, which would have prevented Federal taxpayers' dollars from being used to support outsourcing in future government contracts. This is a commonsense measure to make sure that the Government does not actively contribute to outsourcing, and its rejection by the conferees is a sign of their strong disregard of the practice of "buying American."

This brings me to the subject of corporate tax shelters. We have been fighting to close these loopholes benefiting large companies for a decade. A recent study commissioned by the IRS estimated that abusive corporate tax shelters cost honest Americans as much as $18 billion annually, or $180 billion over 10 years. Put another way, every month that the majority and the administration obstruct efforts to shut down corporate shelters, it costs honest taxpayers over $1.5 billion. It has been several years now since the Enron debacle, and yet the majority has still not sent to the President a tax bill to shut down these shelters. While the Senate has taken actions over and over again to target shelters, they have been blocked by the majority party.

For example, in June 2002, the Senate passed tax shelter legislation as a stand alone bill and as part of the CARE Act. The other chamber did not. The Senate passed it again in April 2003 as part of the CARE Act; and the other body rejected it. The Senate passed shelter legislation as part of the energy bill in July 2003, and the other chamber rejected it. The Senate passed shelter legislation as part of the Jobs and Growth stimulus bill in May 2003, and it was stripped out in conference.

So I was pleasantly surprised to hear that tax shelter provisions were included in the conference agreement. Then I had a chance to look a little more closely. The conference bill is a shadow of the Senate-passed version, raising $40 billion less by closing corporate tax loopholes than the Senate-passed version. $15 billion of this lost opportunity to make the Tax Code fairer for all Americans would have eliminated phony transactions that have no economic substance and have been used by companies like Enron to avoid taxes. Another measure modified by the majority conferees would continue to allow those individuals who promote tax shelters to make profits while doing so. In contrast, the Senate would have levied a 100
percent penalty to prevent them from making any such profit at the expense of taxpaying Americans.

Sadly, while the underlying core components of the bill are flawed at best, much of the rest of the bill is deeply defective. I am perhaps most disheartened over the section on tobacco-and the notable absence of language authorizing the FDA to regulate it. This might just be the largest children's health issue facing Congress. The tobacco industry spent more last year than ever before on advertising-over $11.5 billion-and children continue to become hooked on smoking while they are young and unable to understand the health ramifications of smoking. It is now believed that smokers could lose on average 10 years off their lifespan-an entire decade. At a time when we are talking about soaring health care costs, it is vital that we regulate a substance that causes 440,000 deaths each year and results in more than $75 billion in direct medical costs annually-much of which is paid for by taxpayer-financed health care programs.

The Supreme Court has acknowledged that tobacco is "perhaps the single most significant threat to public health in the United States" and has effectively reaffirmed that the FDA is the most appropriate agency to regulate tobacco products, given the general scope of its authority and its emphasis on protecting the public health. It is now that Congress must act to clearly give the FDA the long overdue authority it requires to protect Americans, and particularly our children.

I was willing to accept the inclusion of a tobacco buyout under the clear understanding that it would remain linked to giving the FDA regulatory authority over tobacco. Americans want us to take this important step, and but this report falls short. We all know that tobacco is a substance that reduces the quality of life and results in untimely death with lifelong use. We had a unique opportunity with this bill to make a real difference in helping to protect our nation's children and the majority conferees killed this bipartisan effort that Senators KENNEDY and DEWINE spearheaded.

The conference agreement left out other very important and widely supported worker protections that would have prevented President Bush's regulations that will deny overtime protections to 6 million hard-working men and women, including registered nurses, cooks, clerical workers, nursery school teachers, and many others from taking effect.

The Senate has voted against the Bush overtime rule three times, and the other Chamber twice. The Senate FSC bill included two amendments that preserve workers' overtime-the Harkin amendment that would block only the parts of the overtime rule that strip workers of overtime rights, and the Gregg amendment that passed 99 to 0, which would preserve overtime for 55 job categories. Majority conferees, at the behest of the White House, stripped the overtime protections from the report. Even after the Senate conferees voted yet again to retain the Harkin amendment, it was stripped out.

The Fair Labor Standards Act was enacted in the 1930's to create a 40-hour workweek, and it requires workers to be paid fairly for any extra hours. American workers work more hours than any others in the world-1,900 hours per year. Yet, still, they need more to get by and make ends meet. With 8 million Americans out of work, and with so many other families struggling to make ends meet, cutbacks on overtime are an unfair burden that America's workers should not have to bear. Especially in times like these, it's an incentive for job creation, because it encourages employers to hire more workers, instead of forcing current employees to work longer hours.

I am amazed that the majority has again stripped this provision which has overwhelmingly passed both the House and the Senate on 5 separate occasions. This is a clear example of how the majority and this administration continue to turn their backs on working families.

Now, in addition to leaving out a number of the important provisions that I've just enumerated, it also contains many costly and extraneous ones; $101 million for NASCAR by changing the tax treatment of grandstand facilities; $44 million for importers of Chinese made ceiling fans; $28 million for cruise ship operators; $231 million in taxpayer funds to finance bonds for four so-called "Green Bond" mall developments; $247 million in bonus depreciation of some jets and planes; $5 billion over only two years for a new deduction for state and local sales taxes in a select few states; and $27 million for horse and dog gamblers. This one is especially interesting because it exempts foreign gamblers from paying taxes up front on their winnings at horse and dog tracks.

My question is: Where's the special tax break that will help struggling working families in my state? How does it help American workers by giving tax breaks for Chinese fans to be imported tax free to the United States? The Administration seems to agree, and Secretary SNOW also wrote in his letter to Chairman GRASSLEY that:

Both the House and Senate-passed bills include a myriad of special interest tax provisions that benefit few taxpayers and increase the complexity of the tax code. Legislation taking up more than 1000 pages of statutory language (or even 400 pages) goes far beyond the bill's core objective of replacing the FSC/ETI tax provisions with broad-based tax relief that is WTO-compliant.

At the same time, the majority party voted to strip the legislation of an amendment offered by Senator LANDRIEU that would provide a tax break to companies for paying the salaries of activated National Guardsmen and Reservists.

Lastly, it continues to employ the same budget gimmickry as previous tax bills put forward by the majority party and the administration over the past 3 years. For example, a dozen of the tax cuts in this report will expire between 2005 and 2008. Assuming that these provisions are extended, the cost to the Treasury will increase by an estimated $80 billion!

This bill could have been an ideal vehicle for bipartisan efforts to shape a comprehensive economic policy for our nation's manufacturing sector. Unfortunately, it proved to be too alluring for the special interests who just could not restrain themselves. At a time of a record Federal budget deficits-most recently pegged at $422 billion for Fiscal Year 2004-this bill contains too many giveaways to corporations and not enough to help domestic manufacturers and working families. Most regrettably, its passage does not seem to guarantee that the EU will lift its harmful sanctions against numerous United States products. Companies in our home states are hurting from EU retaliatory tariffs, like jewelry manufacturers in Rhode Island, and the conferees should have taken the responsible path in assisting those who are struggling. But they did not.