WASHINGTON - The Senate passed a $170-billion package of corporate tax cuts Tuesday, including provisions to head off a trade war with Europe and stimulate American manufacturing and energy production.
The bill carries other items, including a politically charged blockade against new overtime rules aimed at preventing President Bush from stripping the premium pay from any workers now eligible for the benefit.
The Senate voted 92-5 to pass the package. Tax writers said they hoped their actions would give much-needed momentum to the House, which has struggled to amass support for its version of the measure.
"I was told the House was going to act very quickly," said Senate Finance Committee chairman Charles Grassley, R-Iowa.
The bill would repeal a $5-billion annual tax break for U.S. exporters that triggered punishing tariffs from Europe. The World Trade Organization had declared the tax break an illegal export subsidy.
Tariffs on some American exports hit 7 percent in Europe this month. The penalty started at 5 percent in March and is scheduled to increase 1 percentage point each month until it hits 17 percent next year. In place of the tax break for exporters, lawmakers created a new tax cut for American manufacturers tied to the extent that they make their products in the United States.
Sen. Kay Bailey Hutchison, R-Texas, won a last-minute change that lets architectural and engineering firms take advantage of the manufacturers' tax cut.
Sen. Don Nickles, R-Okla., warned that companies of all kinds would rush to redefine themselves as manufacturers and squeeze into the more favorable tax rates. "We're going to regret it," he said.
The corporate tax bill absorbed billions in additional tax cuts during months of debate. Opponents have criticized some of those additions as wasteful and unnecessary, especially given current budget deficits.
The list of incorporated tax breaks includes $14-billion in energy production incentives. Keeping one eye on rising gasoline prices, the Senate rejected efforts by Sen. John McCain, R-Ariz., to strip the energy tax credits from the bill.
The measure's entire $170-billion cost is offset with money recouped by repealing the $5-billion export subsidy and by closing tax shelters and loopholes.
The largest loophole closure generates $39-billion by blocking companies from creating tax deductions by leasing American and foreign buses, bridges, trains and other public works.
The Senate voted to keep changes to international tax rules, overcoming objections of some senators who said they encouraged companies to move jobs overseas. One of those provisions temporarily cuts taxes on income held abroad when it is brought back to the United States. A set of revised tax rules for multinational corporations has been a major obstacle to progress in the House.
Sen. Ernest Hollings, D-S.C., lost a bid to shift money devoted to the international revisions into more tax cuts for American manufacturers. The Senate voted 23-74 to reject the change.
"They jump-start the jobs in Shanghai and Guadalajara and not Philadelphia," Hollings said. "We are in real trouble. We are losing jobs like gangbusters overseas."
Grassley said the international revisions reduce double taxation of corporations that operate in the United States and abroad.
The bill cleared its last major hurdle when lawmakers agreed to a vote on unemployment benefits. The Senate fell just one vote shy of overcoming budget restrictions and accepting an amendment by Sen. Maria Cantwell, D-Wash., to attach extended federal unemployment benefits to a corporate tax bill.
Five senators voted against the bill: Bob Graham, D-Fla.; Hollings; Judd Gregg, R-N.H.; Jon Kyl, R-Ariz.; and John Sununu, R-N.H.
