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Tuesday, July 13, 2004

Corporate Tax Scam Week!

With a new corporate tax giveway making its way through Congress, larded with narrow tax breaks for the particularly favored, I'm declaring it Corporate Tax Scam Week here at Ragout!

The bill includes some good provisions, like complying with the World Trade Organization ruling against U.S. export subsidies, but "the centerpiece is a tax credit to effectively lower the tax rate on domestic manufacturing from 35 percent to 32 percent," Jonathan Weisman reported last month. White House economists initially opposed the bill on the grounds that it could "inadvertently distort production and have unintended and harmful results." That is, it creates incentives for large firms to shift costs to their manufacturing units and encourages elaborate schemes to reclassify everything possible as manufacturing. More recently, the Bush administration has flip-flopped, and is now quietly supporting it.

Like all tax bills nowadays, most provisions are set to expire in a few years. But if extended, as the Republicans surely intend, the House version will cost $167 billion over ten years, charges Citizens for Tax Justice [41k pdf].

It's also stuffed with provisions that benefit narrow interests, including special tax breaks for NASCAR race tracks and Oldsmobile dealerships, the Washington Post reported today. GE was the biggest winner, according to Post reporters Jeffrey H. Birnbaum and Jonathan Weisman, snaring various provisions to lower taxes on its overseas earnings. They quote Michael J. McIntyre, a Wayne State tax law professor (with an excellent web site):
"The bill is truly amazing," said [McIntyre]. "We had an incentive for exports that was illegal and had to be repealed. Now Congress takes the money saved by the repeal and uses it to reduce taxes on the income earned by U.S. companies in foreign countries, thereby making foreign investment more attractive than U.S. investment."

Remember, Corporate Tax Scam Week ends this Friday at Ragout, but if the lobbyists buckle down and make one last push in the House-Senate Conference, we've got a good shot at Corporate Tax Scam Decade! Fight, GE, fight!

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