This
year-end tax package is a grab bag of gifts for corporations and a lump of coal
for working families.
By
Given the commitment House Republicans profess to balancing the
federal budget, you’d think tax breaks for profitable businesses would be a low
priority. But this holiday season, they’re set to vote for a two-year, $96 billion package of tax breaks — 80 percent of which
will benefit corporations.
All that’s missing is the gift wrap.
The package is a grab bag of loopholes and subsidies that serve
specific interest groups — from NASCAR track owners to rum producers in Puerto
Rico. Efforts to unbundle the parcel and vote on each gift to industry
interests separately have been ignored.
The Active Financing Exception allows banks and finance
companies to indefinitely avoid paying taxes on their U.S. income by claiming
they earned those profits abroad.
The corporate tax code officially forbids
banks from shifting profits earned from loans and other financial activities,
but this policy creates an exception.
That loophole played a key role historically in General
Electric’s notorious tax avoidance strategy. Despite earning $68.4 billion in
profits in the past decade, GE — which was active in finance as well as
manufacturing — paid a tax rate of just 0.4 percent on those profits.
The Look-Through Rule lets multinationals move profits to
offshore subsidiaries without incurring U.S. taxes. Companies can exploit this
loophole to create “stateless income,” in
effect making those profits exempt from taxes in any country.
When this package of tax breaks was extended late last year,
Congress applied it to allof
2014. That made a lovely gift to corporate bottom lines and a big lump of coal
for citizens who saw their earnings subsidize profitable businesses.
Another tax break under the tree, known as bonus depreciation,
allows corporations to write off the costs of their investments in new equipment
at a faster rate than the actual depreciation of those assets.
Supporters claim
the tax break encourages businesses to buy equipment sooner than they normally
would, boosting demand at equipment manufacturing firms.
But the Congressional Research Service found bonus depreciation
is “a relatively ineffective tool for stimulating the economy.” In fact,
the giveaway had “no more than a minor effect.” Nevertheless, Congress has
proposed making bonus depreciation permanent at a cost of more than $280 billion over 10 years.
Business tax breaks have sailed through Congress in recent years
with little concern for their budgetary impacts, while programs that working
families depend on — like education and housing — have been squeezed amid
lectures about the need for “belt-tightening.”
Indeed, Congress seems to operate under a different set of rules
when it considers legislation that directly helps American families. Extended unemployment assistancewas
allowed to expire two years ago. And last year, nutrition assistance for hungry kids was cut.
In this year’s budget battle, tax credits for low-income working
families are at risk. If the Earned Income Tax Credit and the Child Tax Credit
are not extended, 16 million people—
including 8 million children — will be pushed deeper into poverty in 2017.
A
working parent with two children earning $20,000 a year would see her Child Tax Credit fall to
$810 — a loss of almost $100 a month, which would otherwise be used for utility
bills, bus fare, food, or school supplies.
Americans say they want corporations to pay their fair share for
the public programs and services that make our country work. This December,
tell your representatives to protect credits that give hardworking parents a
helping hand and consign corporate tax giveaways to the rubbish bin.
Jessica Schieder
is the fiscal policy analyst at the Center for Effective Government in
Washington.ForEffectiveGov.org. Distributed by OtherWords.org.