Peoria Journal Star

June 19, 2004

Cat persuaded to back phaseout of export subsidy
Taxpayers' advocacy group criticizes the deals made to get corporate backing

of Copley News Service

WASHINGTON, D.C. - Caterpillar Inc. threw its support behind a controversial corporate tax bill this week after House Speaker Dennis Hastert personally promised its chairman he would work to protect the company's interests in a House-Senate conference.

The bill is aimed at settling a long-running dispute with the European Union by repealing export subsidies that Caterpillar and other U.S. manufacturers currently enjoy. The bill would phase out those subsidies in three years, but in terms more generous than a Senate-passed bill.

Caterpillar had opposed earlier versions of the bill, but it issued a letter supporting the latest version on Thursday, just before the House voted 251-178 to pass the measure.

U.S. Rep. Ray LaHood, R-Peoria, who also had opposed earlier versions, said Friday that Caterpillar's letter persuaded him to vote for the latest bill, which would replace the $5 billion a year export subsidy with $140 billion in new corporate tax cuts over the next decade.

LaHood said Hastert, R-York<0x00AD>ville, offered to help Caterpillar with an additional transition year. The House bill would phase the subsidy out from 2004 to 2006.

"I told Caterpillar if they provided that kind of a letter and had that kind of agreement that I would vote for the bill," LaHood said.

Hastert spokesman John Feehery confirmed the speaker met personally with Caterpillar Chairman James W. Owens last week. He said Hastert promised to protect the three-year transition contained in the bill.

Caterpillar and Boeing, two of Illinois' largest exporters, have benefited from those export subsidies. Boeing took no position on the recent version.

LaHood previously was part of a group of Republican opponents claiming it would help multinational companies and siphon jobs overseas.

U.S. Rep. Tim Johnson of Urbana was among just 23 House Republicans to oppose the bill. He complained about the bill's cost, saying it was a "polyglot of special interest efforts."

House Ways and Means Chairman Bill Thomas, R-Calif., drew additional support by attaching a $9.6 billion bailout for tobacco farmers and another $3.6 billion to allow residents of states with no income tax to deduct state and local sales taxes from their federal income taxes.

Keith Ashdown of Taxpayers for Common Sense, a not-for-profit taxpayers' advocacy group, criticized the measure as a pork-laden boondoggle.

"This very expensive vote-buying scheme spreads the grease to as many congressional districts as possible," Ashdown said. "To get this fatted cow to market, more 'deals' have been made than in a Turkish bazaar, and taxpayers are the tourists getting ripped off."

Caterpillar's letter was posted on the House Ways and Means Committee's Web site with other letters of support.

"We urge the conference committee to accept a transition that includes a full three years after the date of enactment," said the letter, signed by Owens.

House passage broke a logjam, but reaching a compromise with the Senate is expected to be difficult.

Congress is under pressure to repeal the export subsidies after the World Trade Organization ruled them illegal. The EU has imposed retaliatory tariffs on some U.S. exports.