John A. Quayle blueoval at 1SMARTISP.NET
Wed Apr 28 21:40:37 MDT 2004

Related stories:
04/14/04  Tough tax questions face the next president
03/19/04  With Bush in charge, taxes may still rise

WASHINGTON - Call it an offer Americans probably can't refuse.

House lawmakers recently decided US taxpayers should send $500,000 to
Montezuma, Ga., in a transportation bill. It's not to upgrade an interstate
highway but to improve the sidewalk, lighting, and landscaping between
Cherry and Hampton Streets.

Hey, it's only half a million dollars, but that is one small reason why the
bill is now $19 billion bigger than the president's $256 billion request.

Then there's a new tax bill, launched when Congress wanted to fix a $5
billion-a-year export subsidy that turned out to be illegal under global
trade rules. Now, measures tacked on outside the normal budget process have
expanded the bill's girth to $170 billion in tax breaks:

$519 million for makers of small jets.

$8 million for makers of arrows. Yes, as in Robin Hood.

$25 million for foreigners who gamble at US horse and dog races.

Of course, targeted spending and tax breaks are nothing new to a city where
"all politics is local." But this year, the pork may hit a record even as
the federal deficit surges to worrisome heights.

The trend is sparking concerns among fiscal-policy experts and outrage
among some taxpayers.

The rising deficit, which some economists worry could push up interest
rates in the economy, may actually be a reason for more pork, at least in
the short term.

The bill with $170 billion in corporate tax breaks, for instance, is seen
by Republican lawmakers as the "last train out of the station," a chance to
give long-sought tax breaks to businesses - and create jobs - while it's
still politically possible.

Fall elections may be another factor.

"The Republican leadership doesn't seem to be trying to control it," says
Chris Edwards, director of fiscal policy at the Cato Institute. "Because
the Republicans have such a narrow hold on the House and Senate, the
leadership may feel it needs the earmarks to get their votes."

One man's pork is another's worthy cause. There are passionate backers, for
example, for a nine-line change in the tax code that could save a 1929 Art
Deco hotel in Sioux City, Iowa, from a wrecker's ball.

But between the tax bill and other measures, Congress has "porked out at
record levels," according to a new study by Citizens Against Government
Waste. Some 10,656 projects were stuffed into the 13 appropriations bills
for the 2004 fiscal year at a cost of $22.9 billion.

At the same time, lawmakers added more than 3,250 earmarks into the pending
transportation bill. It ballooned the cost of that bill in the Senate to
$318 billion, $62 billion over the White House request. President Bush
threatens a veto.

It's a far cry from the days when President Reagan railed against the 152
earmarks in the 1987 transportation bill, to no avail. Presidents
Eisenhower and Carter also vetoed bills because of member earmarks, but
they too were outvoted by Congress.

Public interest groups who plunge into the minutiae of spending or tax
bills to find earmarks say it's often difficult to recognize when a
lawmaker has written a special provision into a bill. Special projects are
those that bypass normal budgetary processes: They haven't been requested
by the president or an authorizing committee or vetted in congressional
hearings. They usually serve only a local or special interest. Many appear
in the text of a bill just hours before lawmakers vote.

"We often don't find them until well after the bill becomes a law," says
Keith Ashdown, vice president of policy at Taxpayers for Common Sense.

The corporate tax bill grew, he says, as backers added earmarks in an
effort to break a Democratic logjam. "You do need sweeteners on a bill to
make it move," Mr. Ashdown says, but this one "has greased a mass of
critical palms"

One of the least obvious - and most curious - earmarks in the Senate
version of the corporate tax bill is Section 603(b), which simply nullifies
a previous tax break written into the 1986 Tax Reform Act. This "technical
correction" in the tax code is a critical outcome for developers who hope
to convert the historic Warrior Hotel in downtown Sioux City into
low-income housing for the elderly. "This building is going nowhere until
that changes," says Lance Ehmcke, an attorney for the Warrior Hotel Project

Ironically, this earmark is needed to fix the effect of a previous earmark
that the group managed to get written into the tax code in 1986, which
specifically exempted the Warrior Hotel and 46 other buildings from a
decrease in the historic tax credit program. At the time, it looked like a
boon. Only years later did developers learn that that change prevented the
project from also using low-income tax credits - now a showstopper for
needed financing.

"We've been working on getting a correction for three years," says owner
Lewis Weinberg. "It's been a very expensive process."

But the benefit wouldn't just go to the Warrior Hotel. The Joint Tax
Committee estimates the provision could cost $94 million over 10 years, as
other development projects take advantage of it.

Meanwhile, critics say the preponderance of pork is sinking prospects for
the bill. In the House, the bill is stalled by a dispute among Republicans
over whether more tax breaks are needed for domestic manufacturers. On the
Senate side, Sen. John McCain (R) of Arizona is working to force pork out
of the bill before it comes up for a vote.

"I have deep reservations about voting for this bill," says Sen. Judd Gregg
(R) of New Hampshire, another fiscal conservative. "It's got all sorts of
cats and dogs attached to it, but it's a train leaving the station, and
there are very few of them left. Clearly, they can scale it back."

[Non-text portions of this message have been removed]

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