As you read through various articles that detail what’s in the fiscal cliff “deal” agreed to by both parties — and especially the Democrats — you probably don’t notice the phrase “tax extenders” that were part of the package. Sometimes they’re called “tax extenders and stimulus.” However they’re described, they’re gifts to corporate CEOs — who take them straight to their bottom lines (and into their pockets; see below).
Thankfully, not everyone is dazzled by the sleep-inducing phrase. We’ll sample a few insightful articles here. (Note: This review does not include the Big Oil gifts detailed by Chris in his article yesterday. This is on top of that.)
What are “tax extenders” anyway?
Tax extenders are extensions of corporate tax breaks — give-aways out of the federal purse — that were previously set to expire. Tim Carney describes “tax extenders” in an article at the Washington Examiner (my emphasis and paragraphing everywhere):
The “fiscal cliff” legislation passed this week included $76 billion in special-interest tax credits for the likes of General Electric, Hollywood and even Captain Morgan. But these subsidies weren’t the fruit of eleventh-hour lobbying conducted on the cliff’s edge — they were crafted back in August in a Senate committee, and they sat dormant until the White House reportedly insisted on them this week.
The Family and Business Tax Cut Certainty Act of 2012, which passed through the Senate Finance Committee in August, was copied and pasted into the fiscal cliff legislation, yielding a victory for biotech companies, wind-turbine-makers, biodiesel producers, film studios — and their lobbyists. So, if you’re wondering how algae subsidies became part of a must-pass package to avert the dreaded fiscal cliff, credit the Biotechnology Industry Organization’s lobbying last summer. …
In late July, Finance Chairman Max Baucus announced the committee would soon convene to craft a bill extending many expiring tax credits. This attracted lobbyists like a raw steak attracts wolves. …
General Electric and Citigroup, for instance, hired Breaux and Lott to extend a tax provision that allows multinational corporations to defer U.S. taxes by moving profits into offshore financial subsidiaries. This provision — known as the “active financing exception” — is the main tool GE uses to avoid nearly all U.S. corporate income tax.
Now you know — the bent “globalization rules” aren’t inevitable acts of god. Those rules are bought.
Carney’s post has a list of some of the other tax extensions, including breaks for rum manufacturing in Puerto Rico and for Hollywood movie production. A few of the breaks were for “green energy” — with the likes of GE cashing in again — but most were just your usual corporate welfare — you know, another looting of the federal purse because by people who bought everyone who works there.
For example, the White House itself is responsible for forcing the Baucus bill into the final fiscal “deal” according to Carney:
A Republican Senate aide familiar with the cliff negotiations tells me the White House wanted permanent extensions of a whole slew of corporate tax credits. When Senate Republicans said no, “the White House insisted that the exact language” of the Baucus bill be included in the fiscal cliff deal. “They were absolutely insistent,” another aide tells me. (The White House did not return requests for comment.) Sure enough, Title II of the fiscal cliff legislation is nearly a word-for-word replication of the Family and Business Tax Cut Certainty Act of 2012.
More on that corporate tax giveaway from Huffington Post:
The financial services industry, whose leaders had earlier joined a group of other corporate executives pushing for a “fair” solution to the fiscal crisis, is one of the primary beneficiaries of special-interest tax breaks. The active-financing exception, for example, permits banks like Morgan Stanley to avoid the 35 percent U.S. corporate tax rate on interest income from money lent overseas. A handful of other U.S.-based multinational companies with financing arms, such as Ford Motor Co. and General Electric, also use that exemption to lower their tax bills.
As the article points out:
[T]he “active financing” exception … permits businesses earning interest on overseas lending to defer U.S. taxes on that income indefinitely.
Sweet. This is why you can’t have nice things. Because corporate CEOs, their ex-senator (and congressional-staffer) lobbyists, and their employees in the White House got there first. Click through to either article — or both — for information about how much money these lobbyists make for this work. What does all this lobbying juice get them? From the Huff Post again:
According to Citizens for Tax Justice, the financial services industry paid an average effective tax rate of 15.5 percent from 2008 to 2010, far lower than that of most other industries.
Another sweet deal — for Your Betters — is this one (Huff Post again):
As part of the fiscal cliff deal, Congress also extended another little-known tax break that benefits large multinationals selling products through overseas affiliates. This “pass-through” exemption permits a U.S.-based company to set up a new corporation in a tax haven like the Cayman Islands and sell it a patent owned by the U.S. parent company. Royalties on overseas licensing of that patent would then route to the tax-sheltered firm, instead of the U.S. parent company.
Now let’s look at the scale.
How much did the White House give away?
Carney’s figure for the fiscal cliff “deal” is $76 billion in “tax extenders.” Matt Stoller, writing at Naked Capitalism, has a different number — $205 billion. That’s one third of the savings Obama wanted to “capture” when he offered to put your grandparents on catfood in his first two offers. Stoller:
Throughout the months of November and December, a steady stream of corporate CEOs flowed in and out of the White House to discuss the impending fiscal cliff. Many of them, such as Lloyd Blankfein of Goldman Sachs, would then publicly come out and talk about how modest increases of tax rates on the wealthy were reasonable in order to deal with the deficit problem. What wasn’t mentioned is what these leaders wanted, which is what’s known as “tax extenders”, or roughly $205B of tax breaks for corporations. With such a banal name, and boring and difficult to read line items in the bill, few political operatives have bothered to pay attention to this part of the bill. But it is critical to understanding what is going on. …
Most tax credits drop straight to the bottom line – it’s why companies like Enron considered its tax compliance section a “profit center”. … Surely, a modest hike in income taxes for people who make more than $400k in income and stupid enough not to take that money in capital gain would be worth trading off for the few hundred billion dollars in corporate [*CEO-looted] pork.
This is what the fiscal cliff is about – who gets the money.
* Keep in mind what a corporation is — a money-vacuuming machine that deposits its excess cash into the greedy maws of the CEO class. That’s why the company you work for is constantly de-staffing itself, and why you, if you’re (un)lucky enough to have a corp-cubicle job, are constantly working harder. You work so that the CEO and his buds can get fat off your labor. They keep you poor so they can get richer.
Matt Stoller’s article lists eight of these gems, many with the costs involved. Do click. NASCAR got a pile. Hollywood got a pile. Private railroads got a pile. Even Manhattan banks got money that Bloomberg called “little more than a subsidy for fancy Manhattan apartments and office towers for Goldman Sachs and Bank of America Corp.”
All of this is on top of the goodies discussed earlier in this article. Sweet.
Your bottom line
These “tax extenders” are low-profile gifts to the corporate CEO class. And Obama made sure they were included over Republican objections. If you’re glad you stopped the Republicans in November, congratulations. Now the job has shifted. We need you to help stop the Dems.
Happy New Year.
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