Hardly Kosher

13 October 2004


Bush to Sign Pork-Stuffed Corporate Tax Bill

The purpose of the corporate tax bill is in Mr. Bush’s in-tray this morning was to repeal $5 billion of subsidies to US exporters that the World Trade Organization had adjudged to be illegal. Because of that ruling, 1,600 American exports face retaliatory tariffs in Europe, currently at 12% and rising an additional percentage point each month. However, nothing is ever quite straightforward in Washington. The special interests plundered the US Treasury, and did so legally. The bill will come to about $140 billion.

Senator McCain (R-AZ) said the bill, which is the largest “reform” of corporate tax law in 20 years, is "the worst example of the influence of special interests that I have ever seen." It provides $76.5 billion in tax relief for the manufacturing sector, which was so broadly defined that the bill counts oil and gas companies (well, who’s the president, after all?), architectural/engineering companies, and even film and music firms. NASCAR racetrack owners get a break, but in fairness, so do people with business interests in dog and horse racing. And those who import ceiling fans from China get a $44 million tax cut – as if America’s trade deficit with China needed any help in growing.

There is language in the bill to discourage American firms from shipping jobs overseas, but that won’t mean very much in light of another of the bill’s provisions. Multinationals get a one-year tax cut on profits brought back to America from their operations outside the States – the tax rate on such profits will fall to 5.25% from the 35% corporate rate. In other words, the profits can be returned and dividends paid, and CFOs of multinationals get a year to figure out what to do next.

The bill does close a lot of loopholes, but these revenue enhancements (to use the old Reaganite word for “taxes”) amount to just about the same as the breaks given to the well-connected. Were the federal budget in proximity to equilibrium, this would be laudable. As things are, it would have been better to bring in an extra $140 billion and keep it. At least, that is what a real conservative would do if $140 billion of spending cuts proved impossible.

The WTO issue had to be addressed, especially in light of the Airbus-Boeing nonsense, and the $30,000 tax credit for employers who keep National Guard employees on their payroll is hard to dispute since there really is a war on. But while the country watched the baseball playoffs, week 5 of the NFL season and mourned the passing of Christopher Reeve, Congress just gave away the candy store – again.

© Copyright 2004 by The Kensington Review, J. Myhre, Editor. No part of this publication may be reproduced without written consent.

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