Monday, January 21, 2008

Another Reason Why President Bush . . . . . Ranks Rather Low On My Top 10 List

I'm doing research for a paper and I came across a trade newsletter published by CCH (A Tax and Accounting Firm) on the new changes to tax law encompassed in the 2004 American Jobs Creation Act (which is, ironically, a huge subsidy to multinational corporations, agribusiness and energy companies in addition to US manufacturers). Although the bill did have some good aspects (like capping the SUV deduction at $25,000 - the deduction for a vehicle under 6,000 pounds is still capped at $2,960, the lesson here being: go buy a house on wheels and you can deduct $25,000 of its cost on your taxes -nice) most of it was NEW tax breaks for corporations. The CCH newsletter (by no means a mouthpiece for a progressive or liberal institution) estimated that the majority of companies claiming the new tax deductions had never qualified for these deductions before. And the cost - just about $175 billion. But wait, it gets better.

Here's how it all began. This was the culmination of decades of back and forth between the US and EU at the GATT/WTO dispute settlement courts. It began in 1971 when the US enacted the Domestic International Sales Corporation (DISC) export tax benefit (a benefit to exporters to counter the increasing incentive for US corporations to move their operations abroad). The EU countries responded by filing a complaint that DISC was a prohibited export subsidy. A GATT panel ruled in favor of the EU countries, and the US replaced DISC in 1984 with the Foreign Sales Corporation (FSC) provisions, with the goal of achieving GATT legality. U.S. companies have routinely set up Foreign Sales Corporations—often only offshore shell companies—through which they have been able to export their wares without paying US tax on the profits.

The EU filed a complaint against this as well, and in response the US enacted the ETI (Extraterritorial Income) provisions in 2000 (you can guess how that turned out). So, in October 2002 Congress passed PL 108-357 (aka the American Jobs Creation Act) which repealed the ETI while providing tax cuts for the overseas operations of US firms.

So - more supply-side economics. But, the best part is this CCH newsletter (and remember, this is language coming from tax attorneys - the people who get PAID to find tax shelters. Their evaluation of the bill is as follows:

"Until this past week, Washington insiders believed that the FSC/ETI bill would contain many new and tough anti-tax shelter provisions. The same measures, such as new curbs on corporate inversions and foreign leasing deals and codifying the economic substance doctrine, had been dropped from earlier bills. The FSC/ETI bill was seen as the last, best hope for these measures. Instead, Congress voted not to include the majority of them in the final bill. They also left out language requiring corporate CEOs to verify the accuracy of their business income tax returns or protecting whistleblowers."


Last, but not least, the fine employees at CCH want you to know that taxpayer-friendly incentives were approved for the following:
(1) manufacturers and importers of bows and arrows
(2) manufacturers of tackle boxes and sonar fish finders
(3) Independent film and video producers (including I'm assuming, pornographers)
(4) Wholesale distributors of distilled spirits
(5) Native Alaskan whalers
(6) Nascar track owners
(7) farmers cooperatives

So now you can get drunk, show your friends your impression of Tom Cruise in "Born on the 4th of July," whack off, shoot your companion in the foot with an arrow and harpoon yourself an endangered narwhale with the aid of your new tacklebox all for a lot less money. You can send your thank you notes to the White House care of the NRA/Nascar Political Action Committee.

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