WASHINGTON — Flip through the massive highway bill moving through Congress and you’ll encounter some unexpected detours: tax breaks for the limousine industry, gunsmiths, fishing rod manufacturers, even casinos.
A tax break for stores that sell alcoholic beverages appears in the same bill that includes measures to crack down on drunken driving.
Tax concessions in the Senate version of the bill would cost the Treasury more than $3 billion over 10 years, according to the watchdog group Taxpayers for Common Sense. The House bill contains tax breaks worth an estimated $12 billion to businesses over a decade.
As House and Senate negotiators prepare to work as early as this week on the bill’s final version, they are expected to be lobbied heavily by special interests hoping to hitch a ride on the must-pass measure.
Robert Bixby, executive director of the Concord Coalition, an Arlington, Va.-based budget watchdog group, said that lobbyists were "scrambling to get on board one of the few trains that may actually leave the station."
"Between election-year gridlock and ballooning budget deficits, there will be few opportunities this year to hide special-interest goodies into ‘must-pass’ legislation," he said.
Added Keith Ashdown, vice president of the Washington, D.C.-based Taxpayers for Common Sense: "Lawmakers’ official mantra for coveted tax breaks seems to have become ‘If at first you don’t succeed, try, try again.’ "
The tax breaks range from repeal of a gaming tax, which initially was to apply only to Indian tribes but was extended to casinos, to elimination of a century-old tax on alcohol manufacturers and sales outlets.
Repeal of the gaming tax began as a narrow measure in response to a court case that forced two Oklahoma Indian tribes to pay a federal excise tax on pull-tab games. The tribes contended that because the tax of one-quarter of one percent on wagers — for example, 25 cents on a $100 bet — doesn’t apply to state-run lotteries, it shouldn’t apply to tribes. "What the IRS has told us is that the tax cost more to collect than they receive in revenue,” said Mark Van Norman, executive director of the National Indian Gaming Association.
Senate Minority Whip Harry Reid, D-Nev., offered an amendment that extended the repeal to casinos for bets placed on "sports books" and on certain other games. A Reid aide said the senator wanted to make sure that tribes and casinos were "on an even playing field.”
That increased the estimated cost of the tax repeal from $33 million to $79 million over 10 years, according to one analysis.
Some of the tax breaks tucked into the highway bill have been proposed before — but, as often occurs on Capitol Hill, legislation can spring back to life overnight.
Consider a tax break eagerly sought by farm-state lawmakers to promote the use of fuel made from soybeans. It was part of the energy bill, which has stalled, and is now part of the Senate highway bill.
The Senate bill also includes a measure long pushed by the Wine Institute, the National Association of Convenience Stores and the National Beer Wholesalers Association to repeal a century-old occupational tax on alcohol manufacturers and sales outlets. The groups contend that the tax — $250 per location for retailers, $500 for wholesalers and $1,000 for manufacturers — places a burden on small wineries and mom-and-pop stores. This repeal measure has drawn opposition from Mothers Against Drunk Driving.
Eliminating the tax would reduce revenues to the Treasury by $768 million over 10 years, according to a government estimate.
Another measure would repeal the "gas guzzler" tax on stretch limos.
The limo industry has pushed for the tax’s repeal for more than a decade, contending that it adds $1,800 to $2,500 to the cost of a stretch limo, which has helped drive manufacturers out of business and has hurt the owners of small fleets of limousines.
And, the industry argues, a similar tax on yachts was eliminated a long time ago. "Some guy driving around in a $5-million yacht burns more gas than I’ll burn all year, and he doesn’t have to pay a tax and I do," Solombrino said. He called the revenue loss to the Treasury from the tax’s repeal — estimated at $48 million over 10 years — "insignificant."
The Senate bill also includes measures to extend to foreign arrow makers a tax now paid by domestic manufacturers, a measure that proponents say is needed to prevent U.S. jobs from moving overseas. It also includes a provision to exempt custom gunsmiths who make fewer than 50 guns a year from a firearms tax.
And the Senate bill would impose a $10 cap on the federal excise tax on fishing rods, a measure that a representative of the American Fly Fishing Trade Association said is needed to keep U.S. fishing-rod makers from being put at a competitive disadvantage to foreign manufacturers.
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