Info Clearing House — Generous new tax break for Bechtel and Halliburton?
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Edmund L. Andrews NYT
Wednesday, October 29, 2003
Copyright © 2002 The International Herald Tribune | www.iht.com
WASHINGTON Bechtel, which hired a former commissioner of the Internal Revenue Service to lobby on its behalf, has won support from Republicans in the House for what could be a generous new tax break.
The break, which was to be taken up Tuesday by the House Ways and Means Committee, was originally intended to help shore up U.S. factory jobs by reducing the tax rate for domestic manufacturers to 32 percent from 35 percent.
But the bill now includes a provision sought by Bechtel, an engineering conglomerate that is one of the biggest recipients of government contracts for Iraqi reconstruction, that would reduce taxes on “architectural and engineering services.”
The new provision would also benefit Halliburton, whose previous chief executive was Vice President Dick Cheney and which now has a Pentagon contract to repair Iraqi oil facilities. Another company, Fluor, which recently won a $102 million contract to work on Iraq’s electrical system, would receive a tax reduction as well.
The value of the tax break remains unclear, and there was confusion on Monday over whether it would apply to profits earned on the billions of dollars of work that the companies do outside the United States.
But the provision is merely one example of many special-interest items that have been attached to what Republican and Democratic lawmakers both consider a vital tax bill. The general purpose of the legislation is to replace a longstanding tax break for U.S. exporters that the World Trade Organization has declared an illegal trade subsidy. The bill would repeal the existing tax break, which is valued at about $55 billion over the next 10 years, with new tax breaks totaling about $142 billion over the same period.
House and Senate leaders both want to pass a bill quickly because the European Union has threatened to impose $4 billion in taxes on U.S. products if the old tax break is not repealed.The issue has become a bonanza for corporate tax lobbyists, and the bill’s potential beneficiaries now include Hollywood movie studios, oil and gas pipeline companies, logging companies and big agricultural cooperatives.
Donald Alexander, a former IRS commissioner who is lobbying for Bechtel, said the provision to help his client merely preserved a tax break that the company otherwise would have lost.
“We’re not asking for relief greater than what we are being denied,” Alexander said in an interview on Monday, adding that the World Trade Organization estimated the old tax break was worth $22 million a year to architectural and engineering companies. But the new provision could be far more valuable than that. Bechtel, a privately held company that does not disclose its full financial results, had revenue of $11.6 billion last year. About $9 billion of that was in the United States.
The tax break that lawmakers want to repeal affected only Bechtel’s foreign projects. As now written, the new law would reduce the company’s tax rate for both U.S. and foreign work.
Republican staff members on the House Ways and Means Committee said the bill’s purpose was to reduce taxes on work only in the United States. That in itself could prove more generous than what the big construction contractors had before.
But Alexander said his own impression was that Bechtel would receive a smaller tax break on its foreign projects, as under current tax law.
According to the Joint Committee on Taxation, the bill would cost the Treasury about $61 billion over the next 10 years. It would raise $55 billion by repealing the old tax break and $26 billion more by tightening rules on tax shelters and raising customs duties, only partly offsetting the $142 billion in new corporate tax relief.
The New York Times