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House GOP Faces Uncertainty Over International Tax Bill

After Months of Holdup in Conference, Military Fairness Package Finally Looks Poised for Passage

As the clock ticks closer to when the European Union can sanction U.S. corporations for unfair trade practices, House Republican leaders are struggling to keep their troops in line to pass the Ways and Means Committee’s $140 billion tax package because of continuing concerns about the loss of American manufacturing jobs.

The panel approved Chairman Bill Thomas’ (R-Calif.) legislative remedy on Tuesday, but enough opposition remains among the GOP rank and file that it’s unclear whether the bill can make it through the full House before the session ends.

Eleven House Republicans, led by Small Business Chairman Don Manzullo (Ill.), circulated a letter on Monday charging that the bill “will send more American jobs overseas.”

The letter added: “Chairman Thomas’ proposal continues to include a substantial foreign tax reform package that lowers the cost of doing business overseas for American companies. This necessarily will encourage American companies to move more American jobs offshore to China and other locations.”

One House GOP leadership aide confirmed that this argument is what leaders will have to dispel to convince a Republican Conference skeptical of enacting a complex tax cut package that will be difficult to explain on the stump.

“It’s gonna come down to how it’s sold,” the GOP aide said, adding that it must be seen as more than a bill to give corporations tax breaks. “Leaders must package it as a tax bill to keep jobs here. It’s not the easiest bill to sort of wrap your mind around.”

Jessica Boulanger, a spokeswoman for Majority Whip Roy Blunt (R-Mo.), added: “There’s no question it’s going to be a tough sell due to the complexity of the issue.”

“We have to deal with the World Trade Organization decision,” Rep. Rob Portman (R-Ohio) said at Tuesday’s markup.

Portman reminded his Democratic colleagues that the World Trade Organization has ruled that the European Union can sanction U.S. corporations $4 billion starting Jan. 1 unless Congress acts. “It’s all about jobs, it’s all about competitiveness,” he said. “If we don’t do this, we will be left behind.”

The administration, sensitive to President Bush’s potential vulnerability on the economy with the loss of nearly 2 million manufacturing jobs on his watch, is pushing the package as one that will save jobs.

But the letter-signing Republicans warn that Thomas’ bill goes beyond repealing the tax break the WTO deemed unfair and attempts to overhaul large portions of the tax code.

“A debate over foreign tax reform can wait; aid to U.S. manufacturers cannot,” they wrote, stressing the final bill should focus only on assisting U.S. manufacturers.

A spokeswoman for Minority Whip Steny Hoyer (D-Md.) said that if the GOP leaders had backed a bipartisan bill drafted by Manzullo and Reps. Charlie Rangel (D-N.Y.) and Phil Crane (R-Ill.), they would not be having such a difficult time now.

The bill has not yet been scheduled for a vote on the House floor. The Senate Finance Committee already approved a smaller package, so the issue is likely to wind up in conference committee if both chambers have time to debate the matter before the session ends.

Rangel basically offered the Senate version as an amendment at Tuesday’s markup, but it was defeated. He will try again on the House floor, according to spokesman Dan Maffei.

Maffei predicts the bill will have to be altered significantly to gain passage on the floor.

Amid the uncertainty over the international tax package, House GOP leaders are poised to pass a scaled-back version of the Armed Forces Tax Fairness Act that has been mired in conference committee for months.

The proposed legislation would allow survivors of U.S. military members killed in the line of duty to receive a $12,000 gratuity payment tax-free. Survivors currently receive $6,000, half of which is taxable.

There was a major blowup earlier this year when House Republicans passed a military tax fairness bill that, among other things, made the existing $6,000 gratuity benefit tax-free — but then added various unrelated provisions such as tax breaks on archery equipment and fishing tackle boxes.

Democrats are pleased that the special interest provisions unrelated to the military are left out of the new bill sponsored by Rep. Rick Renzi (R-Ariz.). But the minority is upset that other key military-specific provisions — such as reimbursement for the lodging expenses of National Guard and Reserve members — were not put into the Renzi bill.

Rep. Chet Edwards (D-Texas) charged that Republicans are “finally responding to the pressures from Democrats and veterans groups to provide some modest benefits to service men and women.”

But, he added, “they will not be off the hook if they try to pass this bill so quickly” without all of the benefits for military families included in the original version.

Renzi, who estimates that 16,000 families would receive reimbursement from his bill, responded, “There are other elements that could have been added, but it wouldn’t have been able to pass by the end of the year.”

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