Stark Statement on FSC 'Replacement' Bill

November 13, 2000

[2] Then the Senate Finance Committee made some minor changes to the bill that appears to bring the U.S. closer to WTO compliance than the House version without sacrificing the current tax benefit received by Caterpillar Inc. This version came back to the House and was voted on in H.R. 2614, the $240 billion GOP tax package. The House leadership thought they were doing their corporate constituents a favor by attaching the FSC to a bloated tax package. Now we're here once again because the majority leadership thought they could bait Clinton into signing a bad tax bill if they attached the FSC to it. No such luck! Clinton has threatened to veto the tax bill and the Senate has no intentions of acting on it.

[3] The bill before us today is nothing more than corporate welfare for some of the nation's most profitable industries. The European Union has filed a complaint with the World Trade Organization (WTO) that the FSC is an export tax subsidy and therefore illegal under international trade laws. I completely agree. Yet instead of repealing the tax subsidy and complying with our international trade obligations, this bill seeks to remedy the FSC with a near exact replacement.

[4] The Institute on Taxation and Economic Policy recently released a report that shows a rise in pretax corporate profits by a total of 23.5 percent from 1996 through 1998. At the same time, U.S. Treasury corporate income tax revenues only rose by a mere 7.7 percent. In addition to the myriad of corporate tax deductions this Congress insists on expanding, programs such as the FSC can help explain the disparity in corporate profits and corporate income tax rates.

[5] The FSC helps subsidize some of the most profitable industries such as the pharmaceutical, tobacco and weapons export industries. Why should Congress help out the pharmaceutical industry if the industry insists on charging U.S. consumers more for prescription drugs than they charge in Europe? We shouldn't! The pharmaceutical industry sells prescription drugs in the U.S. at prices that are 190-400 percent higher than what they charge in Europe. The U.S. subsidizes the pharmaceutical industry by approximately $123 million per year through the FSC. This is unfair to the American taxpayer and must not be allowed to happen.

[6] The top 20 percent of FSC beneficiaries obtained 87 percent of the FSC benefit in 1998. The two largest FSC beneficiaries, General Electric and Boeing, received almost $750 million and $686 million in FSC benefits over 8 years, respectively. RJ Reynolds' FSC benefit represents nearly six percent of its net income while Boeing's FSC benefit represents twelve percent of its earnings!

[7] It is high time we stop allowing corporate interests to dictate U.S. spending. We didn't pass a prescription drug benefit for seniors in the 106th Congress so we shouldn't be rushing through a piece of legislation that gives corporations a $5 billion per year tax break. I urge my colleagues to put working families, children and our seniors first, and oppose H.R. 4986.