End Corporate Welfare

[BettorsChat]

Bob Fertik May 23, 2011

If we just closed the spigot of dollars flowing to corporate treasuries, over $2 trillion could be used to create jobs, protect Medicare, and reduce the federal deficit.

Corporate welfare is deeply embedded in our federal budget, from tax breaks to direct subsidies. According to Citizens for Tax Justice, "corporate subsidies had risen so much that the average effective U.S. federal corporate tax rate paid by America’s largest and most profitable corporations on their U.S. profits had fallen to only 18.4% - barely over half the 35% statutory rate."

We offer a modest menu of corporate welfare cuts that deficit-obsessed politicians can choose from - cuts that would not require a single dime to be slashed from social programs, schools, Medicare or other investments in people.

Estimated savings from enacting the whole list: over $2 trillion

End Big Oil and Big Gas Tax Breaks
2011-2015 savings: $80 billion (Taxpayers for Common Sense). http://www.taxpayer.net/user_uploads...05-17-2011.pdf

Big Oil has made almost $855 billion in profits in the past decade. There is no need to give such a profitable industry a tax break.

End Deferral of Taxes on Income of U.S.-Controlled Corporations Abroad
2011-2015 savings: $199 billion (Citizen for Tax Justice estimate). http://www.ctj.org/taxjusticedigest/..._corporate.php

Encourages off-shoring of work and capital.

End Accelerated Depreciation on Equipment
2011-2015 savings: $141 billion (CTJ estimate). http://www.ctj.org/pdf/corporatetaxreform.pdf

Accelerated depreciation can result in a very low, or even negative, tax rate on profits from a particular investment.

End Deduction for Domestic Manufacturing
2011-2015 savings: $76.7 billion (CTJ estimate). http://www.ctj.org/pdf/corporatetaxreform.pdf

Provides virtually no benefit to the economy and is blatant corporate welfare.

End Last-In, First-Out Accounting (LIFO)
2011-2015 savings: $24.2 billion (CTJ estimate). http://www.ctj.org/pdf/corporatetaxreform.pdf

Corporations use LIFO to hide their true profits.

Cut Subsidies to Big Agribusiness: $52 billion (Taxpayers for Common Sense). Taxpayers for Common Sense

Small farms are disappearing while big agri-business racks up huge profits—with corporate welfare support.

Permit Government to Negotiate Drug Prices for Medicare. Savings 2012-2021: $157.9 billion. http://grijalva.house.gov/uploads/Th...20Analysis.pdf
(Congressional Progressive Caucus).
Barring government involvement is an indirect corporate subsidy.

End Tax Breaks For Drug Companies. 2011-2020 savings: $50 billion (estimated based on figures from Rep. Jerold Nadler). Congressman Nadler - Nadler Pushes to End Tax Breaks for Pharmaceutical Companies

Stops a $5 billion-a year annual tax break for direct-to-consumer advertising. We should pay for drug companies to market to us?

Enact A Financial Crisis Responsibility Fee. 2012-2021 Savings: $70.9 billion (Congressional Progressive Caucus). http://grijalva.house.gov/uploads/Th...20Analysis.pdf

Imposed on largest banks as a repayment of corporate welfare extended via bank bailouts for financial crisis precipitated by banks.

Enact a Derivatives and Speculation Tax. 2012-2022 savings: $650 billion (Congressional Progressive Caucus). http://grijalva.house.gov/uploads/Th...20Analysis.pdf

Wall Street receives indirect corporate welfare/subsidies via a regulatory system and infrastructure investment for which it pays virtually nothing. A very tiny transactions tax will end the corporate welfare.

Cut Military Budget 2011-2020 Savings: $550 billion (Sustainable Defense Task Force).



If Congress is determined to cut the budget deficit, it should start by ending Corporate Welfare.

We have identified $2 trillion in Corporate Welfare that can and should be eliminated immediately:

Big Oil and Big Gas Tax Breaks: $80 billion
Deferral of Taxes on Income of U.S.-Controlled Corporations Abroad: $199 billion
Accelerated Depreciation on Equipment: $141 billion
Deduction for Domestic Manufacturing: $76.7 billion
Last-In, First-Out Accounting (LIFO): $24.2 billion
Subsidies to Big Agribusiness: $52 billion
Negotiate Drug Prices for Medicare: $157.9 billion
Tax Breaks For Drug Companies: $50 billion
Financial Crisis Responsibility Fee: $70.9 billion
Derivatives and Speculation Tax: $650 billion
Wasteful Military Spending: $550 billion
By ending Corporate Welfare, Congress can afford to do what the American people want - create jobs and protect Medicare - and still reduce the federal deficit.

End Corporate Welfare | Democrats.com

[vols fan]

End Corporate Welfare | Democrats.com

Enough SAID!!!!!!!!!

[umreb78]

BC: That’s a very interesting post, and while your views and mine don’t mesh very often, even I see SOME good in the ideas in this post. I appreciate the fact that by and large, you don’t put up posts that simply demean and try to minimize the posts of members who disagree with your own positions. My feeling, right or wrong, is that you are merely an HONEST liberal and I’m sure you know from my postings that I am an HONEST conservative. Due to that, I feel like you are a worthy debate opponent and I’d like to address some of the specifics included above. Maybe you can persuade me, maybe I can persuade you, or maybe neither, but here goes. In any event, I am quite serious about wanting to engage you in this discussion.

Maybe the only significant difference between libs and cons is purely economic theory so let’s start there. First, I think we would both agree that any successful economy must be based upon the growth of that economy. Agreed? Well, the only way that an economy can grow is simply to create more wealth inside that system as time passes. In other words, if there is not REAL growth, the same total amount of wealth owned by that economy is re-circulated. Absent growth, everything about the economy is a zero sum game. In a stagnant economy, some (the libs would say, the elite already wealthy) become richer and richer, but unless there is additional “wealth” being created, for every extra dollar that goes to the rich, someone on the other end of the spectrum becomes “poorer”. Do we agree on that point?

For discussion purposes, let’s assume that this is, and has been, the condition of the US economy since around 2006. In such a scenario, the same amount of “wealth” has been floating around for the last five years and is virtually all held in the hands one of three distinct “owners”…the government, the BIG businesses (virtually all of which are gigantic multi-national corporations), or the citizens of the US. Regardless of the current holders of this wealth, no economy can long survive if the equation truly is a zero-sum game.

Rhetorically, I would ask you which of the three stakeholders mentioned above are the best equipped and most likely to actually produce, create, invent, or manufacture an asset (something with value) that will move us away from the zero-sum? My answer, in a society NOT FULL of crony-capitalism, would be the businesses. Secondly, the citizens, and not even in the conversation would be the government. Seriously, can you provide any instances in which the government actually CREATES any wealth? I’ve owned my own business for 25 years and there is money that I have to spend that creates not one cent of revenue (i.e., wealth). These expenses are called overhead and, while necessary, they do nothing but DEGRADE my bottom line. That, BC, is what the government represents in the US economy…OVERHEAD. As you might appreciate, my opinion is that I want the greatest amounts of “US wealth” in the hands of the businesses (small ones in particular) and the populace. I want as little as possible in the hands of the governments since the spending they incur, regardless of nature, rarely, if ever produce anything of value. As a businessman yourself, do you actually think the government is better able to spend YOUR dollars than are you? Are they that much more enlightened, smarter, or better decision makers than you are? I don’t even know you, but I will guarantee that you make more productive use of your money than Washington does.

In a pure capitalist economy, the soveirgn government has but a single mandate with respect to the economy…just one. That function is to create an environment in which the creation of “new wealth” is not stymied or infringed upon. Notice that I didn’t say they were authorized even to promote the creation of this new value. They simply should, within reason, enact regulations that do not permit the business function to violate the rights of their workers or customers…period. The “within reason” is important. But, we do NOT enjoy a pure capitalist system. Sadly, in today’s world, the multi-national big businesses and especially the “banks too big to fail” cannot be separated from the government. The corruptocrats in both camps are disgustingly dependent upon one another. The big business contemptible whores, to a very large degree, control who will be elected to both branches of the federal government. The tens of millions they “invest” in political campaigns are paid with full knowledge that the pussy politicians will repay their largess in spades through the (equally corrupt) tax code. Over the years, and it may surprise you that I agree with you on this, I’ve come to despise both the elected officials and the “too big to fail” mega-industrialists.

So, who then is left that I would entrust the lion’s share of our US wealth to? Easy question, small businesses and individual citizens. Most folks don’t realize that economists generally consider any business with less that $10 million in annual revenues to be “small businesses”. I am no fan whatsoever of the international banks nor the major oil companies and I’ll speak to that below when I talk about the specific tax revenue enhancers described in your post.

I guess the ultimate point I’m trying to make here concerns the involvement of the government in almost every issue affecting the economy. Yes, we have ongoing deficits and a national debt that I am confident will be the ultimate killer of the US as a world power. While the media is now focusing on the current situation and what must be done to “fix it”, they rarely focus on the causes of the crisis. Whether one is an ideologue who preaches that the problem is a direct result of a decade of two…make that three…foreign wars, the bailout of the banks, the profoundly failed stimulus, or whatever, the real cause is simply that the government has, for a decade, spent far more “wealth” than it has resources to pay from. So, now finally someone has decided that we have a problem. The Ds want to raise taxes while the Rs want to slash spending. I’m neither a D nor an R, but I am smart enough to know that seeking (primarily) a solution through raising taxes is amazingly stupid. The LAST thing I want is for Washington to get their hands on even more of the money from small businesses and citizens. Why?
• The government is the worst place to park money if the desire is to “eliminate the zero sum game” by growing the economy through creating new wealth, and
• The idiots in Washington treat taxpayer money as their own and will spend every dime plus a lot more. Whether it’s on bank bailouts, union subsidies, welfare program increases, or studying shrimp on a freakin treadmill, they will spend every dime to “buy” as many votes as possible to protect their own counter-productive jobs.
So, NO, generally I don’t want to see the deficit problem resolved through tax increases!

Sorry this is so long so I’ll get on to addressing the myriad of ideas in the proposal in your post:
• Generally, I oppose any tax benefits available only to select industries, or more obnoxious, any benefits available only to SPECIFIC COMPANIES. As a CPA for 30 years, I assure you that there are many of the latter in the current tax code. God’s Truth!

IDEAS I WOULD SUPPORT:

• Big Oil and Gas Tax Breaks:
o The principal “break” given O&G companies is their ability to writeoff in the first year of a well all the Intangible Drilling Costs (“IDC”) incurred in bringing the well online. Eliminating this deduction would definitely increase the company’s current tax liability. But this provision, while helpful to the industry, represents only a timing difference in the deduction. Absent the IDC provisions, the company would have to deduct the IDC ratably (depreciate it), over the projected useful life of the well. Substantively, I don’t have an issue with eliminating this, but if it is eliminated, it’s a guarantee that it will add something between 25 and 40 cents to a gallon of gas. No serious thinker could possibly not be aware that the oil companies would pass this increase on to the consumer at the pump.
 Let’s look at the money flow changes this would bring about: Oil company passes this on to consumer so oil company’s profit is the same…change it or not. Consumers “eat” the additional 25 – 40 cents a gallon so it hurts the citizens. Washington increases its tax revenues by 25 – 40 cents a gallon. That sounds GREAT…more lubricant for politicians to “grease the right wheels to stay in office”…Oh, check that, Washington doesn’t actually “spend this money”. No they use it to reduce the debt and deficit???? Got some waterfront property in Arizona if you’re interested.
• End Tax Deferral on Foreign Profits:
o This “redistributes” wealth from multi-national corporations to the Federal government, thereby benefitting the economy how??? Not no, but HELL NO. There is a better way. Declare a moratorium on taxing foreign profits repatriated to the US for a brief time. In exchange for the pass on paying taxes on foreign profits, each "repatriator" must commit to using 25% of the repatriated funds to paying for “newly created jobs in America” or for capital expenditures made to purchase new equipment that MUST be used in the US.
• End subsidies to Agri-business:
o Hell yes. Farmers should grow what they want and in whatever quantities they want. Bumper crops result in lower consumer prices, failed crops create a shortage in that product which inflates the price, good farmers make money, lousy farmers lose money (as it should be in any business).

• End Drug Company Subsidies for Direct to Consumer Advertising:
o Hell yes, again. Until I get my MD or am permitted to write my own scripts, there is NO REASON for any drug ads being sent to me. And even if the manufacturers want to market to me, nobody’s tax dollars should be paying for that crap.

PROGRAMS I CAN’T SUPPORT:

• End Accelerated Depreciation (“AD”) on Equipment:
o AD does not cost the government any tax revenue. AD involves being able to writeoff a larger percentage of the cost of a piece of equipment in the early years of ownership and a lesser percentage on the backend. This proposal is not a revenue enhancer, but merely an acceleration of when some of the taxes are due.
 When I buy a new grader for $100,000, the AD allows me to writeoff through depreciation the following amounts by year: 15k, 24k, 17k, 13k, 9k, 9k, 9k, and 4k. Without AD the annual writeoff would be 8k, 14k, 14k, 14k, 14k, 14k, 14,k, and 8k. Either way, I’m still writing off the $100,000 purchase price. By the way, this provision has been in the Code since 1986.
 I assure you that there have been instances where, on the fence as to whether buy a piece of equipment this year or not, the AD provisions have incentivized me to buy it (revenue for the equipment maker) and get it onto my jobs (a job for a new worker). These provisions represent an occurrence where governmental tax policy does encourage me to “grow more wealth” for the economy.
• Any proposal originating in the Congressional Progressive Caucus. Period. The CPC to me is the Socialist arm of the American political system. While dominated by Ds, there are many, many Rs who are also in the CPC’s ranks.

Shit…way too long, but I wanted to say many things. If any BC members have actually read all of this, I would appreciate any feedback you might have…especially, you Mr. BC…Thanks for the time.

[Art]

Our economy is adulterated by a corrupt political process and corrupt government. Lobbyists are brokers for special interests to get legislation and tax breaks (welfare) in return for votes or money to get votes for re-election. Unions and corporations are primary special interest groups here, but there are many others.

Take the money out of campaigns (let government fund them as limited to media reports from candidates and public debates) and institute term limits, and you remove the corruption.

Our government is regulated by money much more than by citizen votes.

The biggest debate now is between liberals who are progressives (socialists who want to control capitalism and regulate all citizen behavior, and Marxists who want to redistribute wealth to rob from those who earn money and give this money to those who did not earn it) on the one hand, and Tea Party advocates as "laissez faire" capitalists who want libertarian government that only controls criminal behavior and ensures fully informed and valid consent on both sides of any transaction. If we had Tea Party libertarian-capitalism, no money involved in campaigns, and salary caps at a 10 to 1 ratio (max salary of one million a year and minimum salary of $100,000 a year for a full time adult worker), with no entitlements for anybody (no unemployment, no social security, no government health care, etc.) where everybody is responsible for their own welfare, education, health care, etc., this would be the best economy in th world.