Magazine article The American Prospect

The $212-Billion Giveaway. (the Taxonomist)

Magazine article The American Prospect

The $212-Billion Giveaway. (the Taxonomist)

Article excerpt

SPECIAL-INTEREST ZEAL TO USE THE NATIONAL SECURITY crisis as an excuse for huge new upper-income tax breaks continues unabated in Washington, D.C. On a party-line vote, the House on October 24 approved a bloated "stimulus" tax-cut bill that makes a mockery of the previous bipartisan agreement between congressional leaders and the administration that additional stimulus measures should be temporary and limited to a total of $50 billion to $75 billion. Instead, House Republicans have adopted a laundry list of new tax breaks, some explicitly permanent, that are officially expected to cost a staggering $ 212 billion over the next three fiscal years--and heaven only knows how much thereafter.

Two-thirds of this latest round of GOP tax cuts would go to corporations. The tax changes for individuals, which include a 10 percent drop in capital-gains taxes, are also sharply tilted toward the wealthy. Overall, almost three-quarters of the total tax reductions next year (including the benefits to capital owners from the corporate breaks) would go to the top one-tenth of all taxpayers. That includes the 41 percent that would go the best-off 1 percent; the average tax cut in 2002 for that group would be almost $27,000 per taxpayer.

Under the bill, the biggest current corporate-tax subsidy--for what is known as accelerated depreciation--would be almost doubled, at an estimated cost of $109 billion over the next three years. Ostensibly, this expanded loophole will expire after 2004--but similar "temporary" measures enacted in the past have more often than not been routinely extended.

The corporate "alternative minimum tax," which now discourages tax sheltering and forces some otherwise low- and no-tax-paying corporations to cough up at least something in taxes, would be permanently repealed. As a bonus, companies that paid the minimum tax over the past 15 years would get an immediate refund of those payments. Of the $25 billion in instant corporate-rebate checks, $6.3 billion would be made out to just 14 tax-avoiding Fortune 500 companies--whose rebates would average $450 million each. Topping the list is IBM, which is slated to receive a $1.4-billion rebate check. General Motors is next at $833 million, followed by General Electric at $671 million, TXU (Texas Utilities) at $608 million, DaimlerChrysler at $600 million, and ChevronTexaco at $572 million. According to The Wall Street Journal, a spokesman for GM said that the company is "very pleased."

In addition, House Republicans want to make it easier for corporations with loophole-generated "tax losses" to use them to apply for refunds of taxes they paid in the past, at a cost of more than $10 billion over the next three years. Like the increase in depreciation write-offs, this provision is technically supposed to expire after 2004.

Multinational corporations such as General Electric and the major auto companies would get permanent extension of an expiring tax shelter that allows them to shift profits offshore through manipulation of interest payments. Most of the estimated $21-billion 10-year cost will be incurred in the second half of this decade.

On the individual side, the bill cuts the top income-tax rate on capital gains from 20 percent to 18 percent. Assuming no increase in realized gains, this would cut taxes by $10 billion in calendar 2002 alone (with three-quarters of that going to the wealthiest 1 percent of taxpayers). …

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