By: S. Rowan Wolf, Ph.D.,
Uncommon Thought Journal
Oct. 24, 2004 This work is under a fair use Creative Commons License
Well, Bush got most of his wish list of corporate tax reform, and signed a nifty $136 (+) Billion tax reform package. Forbes calls it "the most sweeping rewrite of corporate tax law in nearly two decades. One has to ask if this is a pay off for past corporate support, or whether it is a "pay it forward" for the next four years.
From most of the news reports on this bill, you would think that it is the only corporate give away in the last three years. It's not. And if Bush is elected (or selected) it probably won't be the last.
Before looking back, let's look at the bill Bush just signed. In typical Orwellian fashion, the "sweeping rewrite" of corporate tax law is called "American Jobs Creation Act of 2004" (HR4520). The introduction reads: "To amend the Internal Revenue Code of 1986 to remove impediments in such Code and make our manufacturing, service, and high-technology."
While purportedly, this little treasure (or king's ransom) benefits business large and small, some benefit more than others. According to CNN Money, the bill allows for tax credit for small oil and gas extractors, and a rapid depreciation schedule for large corps with pipelines (Conoco, BP and Exxon) in Alaska. Earlier this month Congress approved legislation that will provide up to $18 billion in federal loan guarantees to those same companies (80% of the expected cost). As noted in the article: "This should make it easier and cheaper for private energy companies to get financing for the pipeline, because if the companies cannot repay the loans the government will do so." And I imagine the government (we tax payers) will do so.
According to an AP report (Bush Signs $136B Corporate Tax Cut Bill), the bill replaces a $49.2 billion export tax break with $136 billion in new tax breaks. While energy companies get a pretty penny, tobacco farmers get $10 billion (somebody has to pay for all those people stopping smoking), and military contractors General Dynamics and Northrup Grumman get a piece of the action, as do some "Houston companies that have reincorporated in foreign tax havens."
As I mentioned above, this "jobs" bill is not the first corporate handout on Bush's watch. I recommend an interesting report by Citizens for Tax Justice titled Bush Policies Drive Surge in Corporate Tax Freeloading - 82 Big U.S. Corporations Paid No Tax in One or More Bush Years. The report looked at 275 of the Fortune 500 companies and found that in the last three years 82 of them had paid no income taxes in at least one of the three years of the Bush reign. Not only that, 46 of those actually got breaks that put them in the negative tax bracket and the government gave them money. The effective tax rate for the 275 companies dropped from 21.4% in 2001 to 17.2% in 2002 and 2003 (the corporate rate is purportedly 35%). According to the report, GE topped the list with $9.5 billion in tax breaks from 2001-2003. In 2002 and 2003 these same 275 companies were able to shelter more than half of their profits which gave them a three year tax break of $175.2 billion.
Please keep in mind that our current National Debt is in excess of $7.4 TRILLION, and Bush's most recent budget adds a minimum of $513 billion in deficit spending.
No matter who gets the Presidency, we have big problems ahead. Unfortunately Bush will not make that deficit disappear when he leaves office. Floyd Norris over at the NY Times asks Is It Time to Stem Asia Deficits With a Weak Dollar?. Oh what a dilemma since Japan and China hold the lion's share of our debt.
Such a ''weak dollar'' policy would raise the cost of imported goods, and thus hurt consumers. But the alternative is to see more and more American economic stimulus drain overseas as the trade deficit grows ever greater, making the eventual resolution that much more painful.
The problem is that a "weak" dollar means that US workers earn less and pay more. It also means that the interest on our debt to Asia (and elsewhere) would be "less." Unfortunately, a weak dollar also weakens the US credit credibility and makes international lenders (much less the IMF) very nervous about the United States' ability to repay its debt. There are not good economic times ahead. Few are talking about this issue (and certainly not Kerry and Bush), but David Broder over at the Washington Post politely states that fiscal ruin is on the horizon.
It's not true that people in Washington can't agree about anything. Across the policy spectrum, there's a clear recognition that the present path of budget-making is unsustainable -- in fact, ruinous.The Concord Coalition, whose leadership includes prominent Republicans, says that with realistic assumptions but no change in policy, the federal debt will swell by a staggering $5 trillion in the next 10 years. The liberal Economic Policy Institute says that a "budget train wreck" lies ahead. The nonpartisan Congressional Budget Office warns that it looks as if "substantial reductions in the projected growth of spending or a sizable increase in taxes -- or both -- will probably be necessary" to avoid fiscal disaster.
What lies ahead is not a picture of a growing economy with lots of living wage jobs and tax cuts for all. No siree Bob - the reverse I'd say, but the corporations will obviously do well (at least for a while).
Sources and Resources
10/22/04 AP, Bush Signs $136B Corporate Tax Cut Bill
10/22/04 Reuters, Bush tax bill helps energy firms
10/22/04 CNN Money, Bush tax bill helps energy firms
The Bush Tax
McIntyre, 9/22/04, Bush Policies Drive Surge in Corporate Tax Freeloading - 82 Big U.S. Corporations Paid No Tax in One or More Bush Years