I don’t understand much about taxes, so I guess the discussion is, why is this a good thing, now, when we have a record deficit, under-funded Homeland Security/Education/Health Care/Etc., and a killin’-innocent-people-overseas thing going on?
Is there Bill #?
The article repeats Repub claims that the taxbreaks will be balance out by tax raises in other areas of the same bill, in which case I say its a fine chunk-o-legislation. The Dems claim that this won’t be the case as the tax increases will be allowed to expire in which case it probably isn’t such a great thing. Anyone have the straight dope from a non-partisan source.
I am glad to see our embattled bow-and-arrow makers are finally getting a break though.
Eh, I pin the blame on this one squarely on the congressmen, pandering to their bases during an election year.
I love how movie making is now manufacturing.
Unless the movies are pornographic, then they somehow aren’t.
BTW, I really, truly would like to blame this monstrosity on Bush, but I really cannot bring myself to.
Bush could veto (or at keast threaten). Might be his last chance to try that particular executive power out, in fact
I don’t know a huge amount about the bill, but what I know is depressing.
The original bill was for $77 billion. Everything above that is pork.
And Starbucks is considered a “manufacturer” for the purposes of this bill.
My employer is a manufacturer. Sure, we could use some help, but this is disgusting.
This would be an awful time to start. I’m sure he’d win many friends in Congress were he to try that just before an election, and I almost wonder if it’d be pushed through anyway, possibly with even more pork to buy off enough people to get the 2/3s.
You might be right netbrian, but from what I’ve heard, it doesn’t sound like Bush has a lot of problems getting congress to tow the line. I would imagine he has the political capital to survive pissing off the congress a little and it would impress a lot of people if he made at least a gesture towards fiscal responsiblity before the end of his first term.
Some non-partisan organization must have done an analysis of this bill. I couldn’t find anything by snooping on the GAO website or google. Anyone…
He could, but why would he? This is exactly the kind of thing he wants.
From the Economist:
Emphasis added. Hilariously, GW Bush pretends to advocate “tax reform” and “tax simplification” even as he increases the complexity of the tax code. That’s ok, plenty of his allegedly conservative supporters are perfectly willing to bend over as they ignore the facts.
OBTW: these tax breaks are supposedly temporary, but judging from past history the tax breaks are highly likely to be extended, given the current Republican Congress and White House. If these breaks are extended, the law will cost $80 billion over the next decade.
The tax bill closes some loopholes as well. I’m not sure whose ox was gored, but I trust they’ll make their injury known during the next round at the trough.
Oh, for the fiscal restraint of the 1990s.
OBTW II: Bush signed the bill on Friday, as reported on page B4 of the Saturday NYT (Reuters): “President Bush signed the measure aboard Air Force One en route to a campaign rally in Pennsylvania, forgoing a public ceremony that would have attracted attention to the tax cuts…”
OBTW III: Here’s a link to an analysis of the tax bill: http://www.cbpp.org/10-7-04tax.htm First paragraph:
“The bill would take the positive step of repealing an export subsidy that has been declared illegal by the World Trade Organization and closing a number of corporate tax shelters. Unfortunately, the bill uses the revenues raised by these provisions to finance a raft of new corporate tax cuts. Many are narrowly focused, special-interest tax breaks that offer no benefit to the economy as a whole. These tax cuts only serve to erode the corporate tax base at a time when corporate tax revenues have fallen to historically low levels and evidence of corporations engaging in tax-avoidance schemes is abundant.”
Yay!
BA
Thank you for that enlightening contribution to the debate.
Must be H.R. 4520, American Jobs Creation Act
Text here (650 page PDF)
I’ve spent a lot of time looking at this for work.
The best source for information is probably the report from the Joint Committee on Taxation. Here: http://www.house.gov/jct/x-69-04.pdf (sorry about the pdf)
The homepage for the JCT is: http://www.house.gov/jct/
I have no idea where the 136 billion number really comes from. I imagine some aid passed the amount to a reporter who simply accepted the number blindly. If I was more industrious, I could add up all the revenue negative provisions and see if they sum to 136 billion.
Like all tax bills, there are many goodies for favored companies. Most of these items are fairly small in overall impact. The main items in the law are:
- Repeal of an export incentive.
- Establishment of special deduction for manufacturers.
- Extension of bonus depreciation on aircraft.
- Changes to foreign tax credit rules.
- One time reduction in tax on (previously) untaxed off shore earnings.
- Tobacco quota buy back.
- Several provisions aimed at stopping abusive tax motivated transactions (shelters).
In all, it is scored as revenue neutral over ten years. For the next three years, it is scored as costing about $ 18 billion in revenue.
I hope I have been helpful. This is a great board.
… and if the tax breaks are extended -as they usually are- it will cost $80 billion through 2014. Source: http://www.cbpp.org/10-7-04tax.htm , and reported by The Economist Magazine.
If you want a breakdown:
Temporary Tax Cuts in the Corporate Tax Bill That Are Likely to be Extended
(in billions of dollars, 2005-2014)
Additional cost if tax cuts are extended
Small business expensing
$-32.7
Deduction for state & local sales taxes
-29.8
Alcohol fuels income tax credit
-5.7
Other expiring tax cuts*
-11.3
Total, temporary tax-cut provisions
-79.5
(hey, I rounded)
*Does not include the transition assistance for ETI repeal, the tax break for repatriated funds, or the bonus depreciation provisions.
I almost forgot:
Welcome to the Straight Dope Tax Guy! 
Welcome, but he’s going to need to find a new handle, since we’ve already got a member called TaxGuy (no space). I thought it sounded familiar!
I don’t have a cite handy, and it’s 4:30 a.m. here so I’m too lazy to google it (shame on me 
) but I seem to recall hearing on the BBC radio broadcast that this restructruing was mandated by the World Trade Organization in order to get our exporting in line with other countries; something about unfair trade and all.
Is that the bill that was just signed, or is my early morning brain thinking of something else?
In the passage quoted in the OP, it says that the original purpose of the bill was, indeed, to cure some problems that were leading us into a trade war, but that the bill has since grown into a more, shall we say, “multi-faceted” piece of legislation (as all such bills are wont to do).
Didn’t know there would be a handle problem. Anyone know how I can change?
So about 80 billion is determined by assuming future extensions. I guess that makes sense. I wonder where the other 56 billion comes from. I also wonder if there has ever been a 10 prediction that was accurate. Even Stalin kept it to the five year plan.
The repeal of the export incentive is the reason the law had to pass. The WTO had ruled the incentive an illegal subsidy. The EU has imposed sanctions on various items. The pain to US business of the sanctions had begun to outweigh the benefits of the export incentive.
Here is some background:
In 1971, the US created a tax provision for Domestic International Sales Corporations (“DISC”). This allowed US exporters to exclude some income from export sales from taxable income by transferring some of the income to a special US corporation. Effectively, the exports were taxed at a lower rate than domestic sales.
US trade partners objected to the subsidy. The US argued that many of the countries that objected do not tax foreign income at all. The US further objected that most other countries refund Value Added Tax (“VAT”) on exports.
In response to trade objections, the US largely replaced the DISC with the Foreign Sales Corporation (“FSC”) in 1984. This preserved the tax benefit on exports but created a special foreign company for the purpose. This new foreign corporation received the income instead of the DISC. The writers reasoned that if it is acceptable for a trading partner to not tax foreign income, then it is acceptable for the US to tax foreign income at a lower rate.
This cuteness was accepted for a while. The EU began to object more in the 1990’s. The US dragged out the same arguments in its favor.
At about the same time, the speed of computers allowed large US manufacturers to examine all their export transactions in great detail. Once this was possible, the complexity of the law could be exploited to maximize the tax reduction. The largest exporters began amending prior returns for refunds worth tens (and sometimes hundreds) of millions of dollars. The complexity created audit nightmares in the IRS. The IRS tried to bring this under control with regulations in 1999.
After the EU won a WTO ruling, the US replaced the FSC with the Extraterritorial Income Exclusion in 2000. This replacement was another cute attempt to change the law without changing the outcome. The EU objected at once. The WTO ruled against it pretty quickly. The writers seemed to know they were being cute. They just wanted to buy some time to find another replacement.
For the past two years, there has been a lot of haggling in congress and among the business lobby to find a replacement. The new legislation is that Manufacturing Deduction in the new law. Everything else in the new law is extra. This is a fine example of how the tax law becomes a Christmas tree.