WASHINGTON: The $42 billion, deficit-financed tax extender bill that appears headed for final passage illustrates how savvy lawmakers can enact legislation that has almost no support from the general public.
These temporary tax provisions are a caricature of legislative backroom dealing and corporate influence. They include a tax credit for “research” defined so loosely that it includes the development of machines by Chili’s to replace staff in their kitchens and the development of new flavors by Pepsi. They include the “active financing exception,” a tax break for the offshore lending done by companies such as General Electric, a superstar at dodging taxes even by the standards of corporate America.
Also included is “bonus depreciation,” which increases tax breaks for companies that purchase equipment, even though surveys of business owners indicate that this loophole has no significant effect on their decisions to make such investments.
Even those who believe tax policy should encourage these activities must see this bill fails to do that. The bill is almost entirely retroactive, rewarding business activities already completed in 2014. It’s absurd to claim that tax breaks, however generous, can change the past.
To try to cover up the ridiculousness of this $42 billion corporate giveaway without enraging the general public, members of Congress have done their best to divert attention from what they’re actually doing.
Lawmakers ensured that the bill is almost impossible to understand. Many of the more than 50 tax breaks have arcane names. Take, for example, the “active financing exception,” which is a boon to offshore lenders such as General Electric. The head of GE’s 1,000-person tax department reportedly begged for this provision as he dropped to his knees in the office of the House Ways and Means Committee. The “CFC look-through rule” is another example. Sens. Carl Levin (D-Mich.) and John McCain (R-Ariz.) both signed a subcommittee report listing this provision as one of the loopholes Apple exploits to avoid paying taxes.
On paper, the $42 billion tax extenders legislation that Congress is now ready to pass may seem insignificant compared to the proposed larger deal. But if Congress keeps passing short-terms extensions every year or two, the tax breaks will cost $700 billion over the coming decade, according to the Congressional Budget Office.
If our government has $700 billion to spare, it should be devoted to paying for things we really need, not wasted on corporate tax giveaways.