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Tax Legislation Worthy Only of The Trash Heap
From: David Farber <dave () farber net>
Date: Wed, 09 Jun 2004 13:05:54 -0400
Begin forwarded message: From: Ralph Sierra <ralph.sierra () erols com> Date: June 9, 2004 12:55:21 PM EDT To: Dave Farber <dave () farber net> Subject: Tax Legislation Worthy Only of The Trash Heap Professor Farber,Something from today's Wednesday's Washington Post that would be of interest
to everyone: http://www.washingtonpost.com/wp-dyn/articles/A26657-2004Jun8.html By Steven Pearlstein Wednesday, June 9, 2004; Page E01If Republicans really want to honor the memory of Ronald Reagan, they should
toss in the trash the corporate tax legislation making its way through Congress.One of Reagan's greatest achievements was passage, with bipartisan support, of the 1986 Tax Reform Act. The goal of the landmark bill was to make the tax code simpler and fairer while boosting economic efficiency. Loopholes
were closed, tax rates were reduced, and all sorts of distinctions wereeliminated so that individuals and companies with the same income or profits
were required to pay roughly the same tax.Those principles, however, are violated on nearly every one of the 930 pages in the recently passed Senate tax bill and the 398-page draft released last
week by the chairman of the House Ways and Means Committee, Bill Thomas (R-Calif.). With a few exceptions, both bills are grab bags of special-interestprovisions designed to reward the well-connected at everyone else's expense.
They reward companies that have played cynical tax games and open up newvistas for the tax shelter industry. And while claiming that the purpose of the exercise was to create jobs in the United States, they will only enhance
existing incentives for U.S. companies to earn their profits overseas.Worse still, they are almost certain to add billions each year to a federal
deficit that is already too high.Let's begin with those provisions designed to favor particular companies or industries. In the Senate bill, these include cruise-ship operators, foreign gamblers, NASCAR track owners, insurers, timber companies, cattle ranchers, movie theater owners, and manufacturers of small planes, bow-and-arrow sets and fishing tackle boxes. And notwithstanding the fact that skyrocketing oil
prices should provide all the incentive anyone would need to develop newenergy sources, there's a couple of billion dollars a year in new tax breaks for energy companies already well-endowed with them. In a final, gratuitous
insult to the taxpayer, there's even a provision for a blue-ribbon commission to study "comprehensive tax reform." The House would leave out the energy provisions but add tax breaks for bourbon distillers and wealthy taxpayers in places like Texas that, poorthings, have no state income tax to deduct on their federal 1040. High-tech
industry tucked in a provision that would ensure its employees pay no payroll taxes on all those stock options. And in a shameless vote-buyingeffort, Thomas's draft would have the government pay $2 billion a year to tobacco farmers for the right NOT to pay them annual crop subsidies in the
future, as if the quotas were some sort of property right. The original reason for embarking on this legislative escapade was to eliminate a $5-billion-a-year tax break for U.S. exporters ruled illegalunder world trade rules. But to "compensate" large corporations for their
lost subsidies, both versions of the legislation propose reducing the corporate income tax rate by 10 percent for any company engaged in manufacturing -- which, if you read the fine print, turns out to include movie studios, farmers and software programmers, along with any "small business" that makes less than $20 million in annual profit.And if all that weren't enough, there are the dozen provisions that would
magically turn passive income into active, permit more-liberal use of foreign tax credits, allow companies to shift profits from one foreigncountry to another and grant a tax holiday for billions of profits parked
overseas. In aggregate, these will boost after-tax profits at least $5billion a year and give every company fresh incentive to locate operations anywhere other than the U.S. of A. To call this the "American Jobs Creation
Act of 2004" is nothing short of political and economic fraud. This may well be the worst piece of tax legislation to come along since1986. If Sen. John F. Kerry (D-Mass.) wanted to steal the Reagan mantle, he would make plans now to return to Washington from the campaign trail and, Jimmy Stewart-like, lead a protracted Senate filibuster of the final bill.
From his final resting place, the Gipper would be cheering him on. Steven Pearlstein can be reached at pearlsteins () washpost com. © 2004 The Washington Post Company ------------------------------------- You are subscribed as interesting-people () lists elistx com To manage your subscription, go to http://v2.listbox.com/member/?listname=ip Archives at: http://www.interesting-people.org/archives/interesting-people/
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