The Senate passed a $170 billion package of corporate tax cuts yesterday, including provisions to head off a trade war with Europe and stimulate US manufacturing and energy production.
The bill carries other items, including a politically charged blockade against new overtime rules aimed at preventing President Bush from stripping the premium pay from workers now eligible for the benefit.
The Senate voted 92-5 to pass the package. Tax writers said they hoped their actions would give much needed momentum to the House, which has struggled to amass support for its version of the measure.
''I was told the House was going to act very quickly," said Senate Finance Committee chairman Charles Grassley, Republican of Iowa.
The bill would repeal a $5 billion annual tax break for US exporters that triggered punishing tariffs from Europe. The World Trade Organization had declared the tax break an illegal export subsidy.
Tariffs on some American exports hit 7 percent in Europe this month. The penalty started at 5 percent in March and is scheduled to increase 1 percentage point each month until it hits 17 percent next year.
In place of the tax break for exporters, lawmakers created a new tax cut for American manufacturers tied to the extent that they make their products in the United States.
Senator Kay Bailey Hutchison, a Texas Republican, won a last-minute change that lets architectural and engineering firms take advantage of the manufacturers' tax cut.
Senator Don Nickles, Republican of Oklahoma, warned that companies of all kinds would rush to redefine themselves as manufacturers and squeeze into the more favorable tax rates. ''We're going to regret it," he said.
The list of incorporated tax breaks includes $14 billion in energy production incentives. Keeping one eye on rising gasoline prices, the Senate rejected efforts by Senator John McCain, an Arizona Republican, to strip the energy tax credits from the bill.
The measure's entire $170 billion cost is offset with money recouped by repealing the $5 billion export subsidy and by closing tax shelters and loopholes.
The largest loophole closure generates $39 billion by blocking companies from creating tax deductions by leasing American and foreign buses, bridges, trains, and other public works.
''We are closing a lot of loopholes here," said Senator Max Baucus, a Montana Democrat.
The Senate voted to keep changes to international tax rules, overcoming objections of some senators who said they encouraged companies to move jobs overseas. One of those provisions temporarily cuts taxes on income held abroad when it is brought back to the United States.