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October 31, 2003

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A new tax break being considered by a House committee could generously benefit Bechtel and Halliburton–two of the biggest recipients of government contracts for Iraqi reconstruction.

The general purpose of the legislation is to replace a longstanding tax break for U.S. exporters that the World Trade Organization has declared an illegal trade subsidy. Congress decided to do away with the subsidy resulting in 50 billion dollars in savings. Instead of applying that money to help reduce the growing budget deficit, Congress decided to spend it on creating new tax breaks for large corporations.

The legislation, which was taken up by the House Ways and Means Committee on Tuesday, was originally intended to help shore up U.S. factory jobs by reducing the tax rate for domestic manufacturers. But now the bill includes a provision sought by Bechtel that would reduce taxes on "architectural and engineering services." Bechtel hired a former commissioner of the Internal Revenue Service to lobby on its behalf and won support for the break from Republicans in the House.

However, it remains unclear whether the break would apply to profits earned on the billions of dollars of work that companies like Bechtel and Halliburton and do outside the United States.

• Sheryl Fred, reporter for Capital Eye, the newsletter for the Center for Responsive Politics, which has reported in detail on the story.