520 Breaks for Select Companies Added to Tax Bill

washingtonpost.com
520 Breaks for Select Companies Added to Tax Bill
By Joe Stephens
Washington Post Staff Writer

A huge tax bill that Congress passed last week contained a little-noticed gift for select corporations -- tens of millions of dollars in breaks on import tariffs.

Early Saturday morning, in the frantic final hours of the 109th Congress, lawmakers rolled 520 tariff suspensions into the must-pass bill. The provisions will reduce or eliminate taxes on imported products as varied as shoes, camcorders and boiled oysters.

While such suspensions have been around for decades, the flurry of provisions pushed this Congress to a record of nearly 800 for the year. Corporate lobbyists often craft such suspensions to apply to just one product imported by just one company. Many of those companies and their executives have given millions of dollars to political campaigns.

This week, leaders from both parties called for changes in the system.

"This is just good old-fashioned pork," said Rep. Jack Kingston (R-Ga.), vice chairman of the House Republican Conference for the 109th Congress. Kingston described the suspensions as a stealthy version of the congressional earmark -- a term for a measure that directs the government to spend public money on behalf of a particular special interest.

"A lot of members of Congress are just clueless as to what is going on," Kingston said. "You can spend money away or you can tax-credit it away. Either way, somebody else is going to pick up the difference."

Congressional sponsors of the suspensions say they are trying to lower consumer prices and create jobs by cutting costs for retailers and U.S. manufacturers. They say that they generally drop the legislation if trade officials find a U.S. competitor that objects.

Few, if any, of the arcanely worded tariff provisions identify the company that initiated the measure. Some provisions do not identify the product as well, referring instead to strings of numbers keyed to tariff tables as big as telephone directories.

Under informal congressional guidelines, individual tariff suspensions are supposed to cost no more than $500,000 a year in lost taxes. But a Washington Post investigation, published in September, found that the authors of a number of the provisions managed to quietly file multiple measures aimed at a single product. That strategy can allow individual importers to pocket millions of dollars in tax savings.

Rep. Sander M. Levin (D-Mich.), who is expected to chair the House Ways and Means subcommittee on trade next year, said yesterday that he favors including in the suspension measures the names of the companies that would benefit. He also wants to close loopholes that allow companies to evade the $500,000 cap.

"The old days of lack of transparency, I think those days have to end," Levin said. "These are supposed to be small items. . . . I am in favor of keeping it small and making it totally open."

Altogether, the suspensions passed this year could cost the Treasury hundreds of millions of dollars in lost revenue. The previous Congress approved about 440 new and extended suspensions, at an estimated cost of $172 million.

Sen. Charles E. Grassley (R-Iowa), outgoing chairman of the Senate Finance Committee, described the suspensions as good for American businesses. In a statement, Grassley stressed that the provisions had been reviewed by the Commerce Department, customs officials and the U.S. International Trade Commission. His panel had sought industry comment on the proposed suspensions, had posted them on its Web site, and ultimately rejected almost a third, he said.

Nonetheless, Grassley added: "Further reforms are necessary to make the process even more transparent and streamlined. If the new leadership decides to undertake a miscellaneous tariff bill, I'll push for further reforms."

Kingston said Congress should have a chance to vote on individual tariff suspensions. Under the current system, lawmakers must vote for or against hundreds of unrelated suspensions at a time. Kingston said that he ultimately voted for last week's huge tax-and-trade package because it contained many legitimate provisions important to the country.

"Members don't read these bills because they become so voluminous at the last minute," Kingston said. "They are always attached to something we all want."

Steve Ellis of Taxpayers for Common Sense complained that while the 109th Congress failed to take up many important issues, it still managed to pass hundreds of special-interest tariff suspensions. "If you are the right person, you can get something done," Ellis said. "It's one of those really insidious types of problems that will take a lot of work, and a lot of embarrassment for Congress, to try to change. And trust me, members of Congress don't embarrass easily."

In the recent election season, Dennis Spivack tried. A Democratic challenger to Rep. Michael N. Castle (R-Del.), Spivack attacked Castle for sponsoring 29 suspensions in the past two years. Spivack charged that the suspensions would harm small businesses and working families.

"Why did Mike Castle ask the United States Congress to selectively drop import taxes on [a] particular item? Who does this benefit?" Spivack asked in one campaign news release.

Castle's campaign responded that the suspensions helped keep manufacturing jobs in the United States. Spivack lost the election.