Fiscal cliff deal included up to $205bn in corporate gifts, thanks to White House

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.

GP

To follow or send links: @Gaius_Publius


Gaius Publius is a professional writer living on the West Coast of the United States. Click here for more. Follow him on Twitter @Gaius_Publius and Facebook.

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  • Anthony_Eller

    I need help finding what benefits on student loans defaults that the bank are receiving.I know about the lenders having their own collection arm Why would our President and Congress allow this to continue The $1.2 Trillion Student Loan Debt Bubble is going to Bust ! The lower interest rate is not a solution at best a short term fix! ProjectTuitionReimbursement keeping awareness alive and finding solution the the student loan debt crisis

    The corruption is so deep until we vote them out……. we need to remember it’s only 535+1 against roughly 313 million the odds are in our favor!!!

  • Phil Perspective

    A quote has been going around for awhile that says “I’ll believe a corporation is a person when Texas educates one.”

    Its “I’ll believe a corporation is a person when Texas executes one.”

  • Houndentenor

    One of the biggest strawman arguments going around on the right is that liberals are delighted that so many people are now on food stamps. I don’t know about anyone else but I’m horrified. I’m glad that the program is there for people who need it, but it’s awful that so many people are in that situation at this time. Of course if the banks that taxpayers had to bail out would invest the big pile of cash they are sitting on into American businesses more people would have jobs and fewer people would need assistance. The solution is simple. The next time the banks pull this crap we need to take a sledgehammer to monstrosities like Citibank.

  • Houndentenor

    A quote has been going around for awhile that says “I’ll believe a corporation is a person when Texas educates one.” But that makes me wonder. Why can’t a state bring charges against a corporation for manslaughter or negligent homicide? It’s time to show the absurdity of corporations being people and the only way to do that is by pressing criminal, not civil, charges against a corporation. BP knew it’s rigs were unsafe (there are plenty of safety violations to prove that). If a person did that, they’d be charged. Why hasn’t BP? Because BP is not a person. We all know that. Everyone except the courts, that is.

  • http://www.facebook.com/CaptTofu Patrick Galbraith

    Government propping up businesses with tax breaks or bailouts is not “free market” or “supply side” economics. Unfortunately, it seems a lot of people make this mistake and don’t know what a genuine free market is and mistake it for the corporatist big government system we now have of legalized plunder, rent seekers and rent avoiders (lobbyists).

  • http://profile.yahoo.com/UKHRGTXM6PBHIFNOH2EG36AFD4 Tango

    Makes me wonder if someday the country will be called The United Corporations of America.

  • Hue-Man

    Also missing from the corporate entitlements – War Department. Click on the link to see the obscene amounts of cat-food – strike that, greenbacks – that go to war profiteers even compared to the waste when in past decades when countries sought to attack the United States. Important phrase to remember when talking about reducing “entitlements” for poor people while increasing “entitlements” for war profiteers – “steal from the poor to give to the rich”. http://andrewsullivan.thedailybeast.com/2012/12/why-is-the-pentagon-off-the-table.html

    $700 billion per year is $7 TRILLION in fiscal curb talk – but seniors and the poor have to endure personally ruinous cuts to their benefits to generate savings measured in billions of dollars.

  • nicho

    Please don’t destroy what small illusion I have left.

  • http://blogvader.tumblr.com/ Blogvader

    So, we spend only around 80 billion a year for food stamps, but it’s the poor people killing the economy? (And, in fact, SNAP keeps shrinking because Democrats vote with Republicans to cut it.)

    Yet we can spare more than twice that amount to prop up the profits of the folks who bankroll legislators’ campaigns.

    Awesome.

  • Naja pallida

    I would argue they don’t even really have two wings anymore. Whenever they have a big ‘negotiation’ on anything, somehow they always manage come out with the exact same right-wing, supply-side crap that has failed us over and over for the last generation. The disparate viewpoints are only theater. They agree on far more than they disagree on… and all of it includes making the country suffer.

  • http://www.rebeccamorn.com/mind BeccaM

    Remember that number — $205 billion in corporate giveaways — when they come around saying the Medicare eligibility age simply MUST go up by two years, “saving” the Feds $5.7 billion*.

    (* = And increasing costs by $11.4b due to the cost-shifting to seniors, younger insured folks, employers, and states.)

    This is how much American lives and livelihoods are worth. About 2.5% of corporate interests.

  • nicho

    Or say they won’t approve the defense budget until the debt limit is increased.

  • nicho

    I’d settle for a second party — right now we only have one, the Corporate Party, with two right wings, the Republican right wing and the Democratic right wing.

  • Mike Meyer

    Third Party, Folks.

  • cslib

    And for Obama’s next trick approval of the keystone pipeline.

  • Naja pallida

    Judging from profits, they should have done the exact opposite – start removing subsidies, tax credits, and no interest government loans, from industries that don’t need it.

  • Naja pallida

    I think they’d be happy to play chicken. Most of them don’t even understand what the debt ceiling is.

  • Naja pallida

    Anything at all to maintain the status quo and kick the can down the road.

  • MichaelS

    Here’s a concept… if instead of the Repugs holding the Dems hostage on the debt limit, suppose the Dems were to turn the tables on them?… Suppose the Senate turned around and said it wouldn’t vote for any extension of the debt limit unless it also includes guarantees for the social safety net, an abolition of the tax credit for oil companies, and abolishing the carried interest tax loophole? Let the damn country default, take it to the edge, see if the Repugs really want to play that game of chicken after all…

  • lynchie

    $205Billion in give aways and they want to gut SS and Medicare. Additionally the GOP says they will play real hardball over Debt Ceiling but voted to give the Richest Companies a fucking New Years present. Makes you wonder where we all stack up in this other than funding and having any hope of leading a half way decent life torn to shreds. By the way this article is not on HP or in the newspaper so mouth breathers are left with with Rush, Hannity and O’Reilly tell them.

  • nicho

    ‘Zactly — and once people come to terms with that, they’ll stop freaking out every time he serves his masters. He didn’t “cave.” He’s part of the scam.

  • guest1

    Obama is and will always be a corporatist

  • ronbo

    If profits were suffering, Obama would have a case. Unfortunately the current depression, er… “recovery” has Employeers rolling in cash and Employees with about 3% of recovery.

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