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Obama To Veto Corporate Tax Bill

Author: Scarinci Hollenbeck, LLC

Date: December 2, 2014

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President Barack Obama to veto corporate tax bill that would result in $440 billion in tax breaks. The bill, which would make 56 of the so-called “tax extenders” permanent, would primarily benefit businesses, according to Vox. Tax extenders refers to a collection of tax breaks that have been inserted into the tax code on a temporary basis. While they regularly expire, many of them were never intended to be temporary. Hence, it has become all but routine to extend the bills year after year.

There are two main reasons for the faux temporary nature of the tax extenders, the news source explained. First, by never making the bills permanent, their notional cost in CBO scores is reduced. This helps to ‘disguise’ their impact on the national budget. Second, the tax extenders are extremely popular with the businesses that use them, triggering a regular routine of lobbying for their extension or expansion, which is good for incumbent members of congress.

This shouldn’t necessarily leave a bad taste in your mouth. After all, the tax extenders usually have bipartisan support. Conservative legislators like breaks like the “bonus depreciation” rule, which gives businesses the ability to write off more of the cost of certain kinds of newly purchased equipment. Liberals like breaks like the subsidy for renewable energy production. Both sides of the aisle generally recognize that the Research & Development tax credit is good public policy.

At the end of 2013, congress opted not to extend these tax breaks, Vox explained. However, most businesses expected that the tax extenders would be retroactively extended at the end of this year, and have behaved accordingly. As such, most legislators on both sides agree that putting an end to them entirely would be a poor decision. Obama is not proposing to do so, but key issues with the bill in its current form appear to make it unacceptable for the White House.

No working class cuts and slashed domestic spending
The first issue at hand is that making these cuts permanent would add $440 billion to the federal deficit over the next 10 years. While this money would have been missing anyway, putting it on paper has an unfortunate effect on public policy going forward, according to The New York Times. Incoming Republicans in Congress have promised to balance the budget in that time without raising taxes or cutting military spending. This leaves only domestic spending to make up the difference – something Democrats are not happy about.

The other issue is in two missing breaks valued by liberals – a permanent expansion for the earned-income tax credit and the child tax credit for the working poor. Neither was included in the bill, as Republicans claimed that the president’s move to allow more legalized foreign workers would result in more people claiming the tax credit.

The Republicans do not have a majority to overturn a presidential veto, but a bipartisan effort might. The right could also compromise, creating a bill that would be passed by the executive branch. We will simply have to wait and see.

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Scarinci Hollenbeck, LLC, LLC

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