Posted on: Saturday, October 13, 2001

The September 11th attack
House panel approves business tax cuts

Staff and News Services

WASHINGTON — A House panel yesterday approved a Republican plan involving deeper permanent business tax cuts than outlined in earlier discussions and allowing states — including Hawai'i — access to federal unemployment funds.

The legislation approved 23-14 by the House Ways and Means Committee on a party-line vote calls for $195 billion in tax cuts through 2006 instead of the $60 billion to $75 billion temporary tax cuts President Bush suggested last week.

Committee chairman Wil- liam Thomas, R-Calif., said the proposal could come up for a vote in the House as early as Thursday.

It also releases $9 billion from federal unemployment trust funds to states — including $36 million for Hawai'i.

The aid would help shore up the state's $334 million unemployment insurance fund, which state officials said could be cut significantly if all who have filed unemployment claims since Sept. 11 collect their full six months worth of benefits.

The terrorist attacks have wreaked havoc with airline and tourism industries worldwide. With travelers canceling trips, airlines, hotels and other businesses that cater to tourists have seen their revenues plunge and have been forced to lay off thousands of workers.

In Hawai'i, more than 11,000 people have filed new claims for partial or full unemployment benefits since the attacks. The labor department has estimated that 80 percent of those claims are from workers in tourism.

Under the House panel plan, the money from the federal unemployment trust funds does not have to be used by the states to pay jobless benefits. States have the option of using the entire amount for administrative costs.

The legislation allocates $3 billion in state grants to help an undetermined number of jobless workers pay for health insurance. But instead of following the administration's suggestion that the money cover 75 percent of corporate health insurance plans available to the unemployed under the Consolidated Omnibus Budget Reconciliation Act, better known as COBRA, the money can be used to shift the jobless into less expensive state-run health plans.

Thomas said the committee's designation of $3 billion for health insurance coverage is in addition to the $3 billion Bush proposes for COBRA coverage.

About half of the tax relief — $99.4 billion — would occur next year, but many of the measures are permanent and diverge from an earlier agreement by the White House and a bipartisan group of congressional budget officials to limit the package to one year.

Efforts to forge a bipartisan agreement on a smaller, temporary economic stimulus package are continuing in the Senate.

The House legislation includes the administration's four priorities for economic stimulus — supplemental rebates to low-income Americans who did not receive rebates earlier this year, repeal of the corporate alternative minimum tax, faster depreciation allowances for businesses, and an acceleration of lower income tax rates.

The supplemental rebates would cost $13.7 billion and be payable to households that filed income tax returns earlier this year but did not receive the full rebate of $300 per single and $600 per married couple.

Marginal income taxes would decline for income now in the 28 percent tax bracket to 25 percent in 2002 and after instead of the 27 percent rate called for in a $1.35 trillion, 10-year tax cut package Congress passed earlier this year.

Only $28.6 billion of the 2002 tax cuts apply to individuals. The remaining $70.8 billion covers renewal of expiring tax credits and a variety of business tax breaks.

Among the business breaks:

• $40.2 billion to allow firms to claim increased deductions for equipment expenses and depreciation.

• $25.4 billion from repealing the corporate alternative minimum tax that now requires profitable firms to pay at least some federal taxes regardless of their other tax write-offs.

• $4.7 billion to allow corporations to spread out their tax deductions for operating losses over five years instead of two.