A Review of Selected Corporate Tax Privileges

Picture illustration of people silhouetted against a backdrop projected with the picture of various currencies of money

The conversation on corporate tax expenditures is complicated by an official tax baseline that relies on a misleading definition of spending through the tax code.

Adam Michel and Veronique de Rugy write:

The US government uses the term tax expenditure to describe both privileges granted to politically favored special interests and patches to the tax system that address economic inefficiencies created by the income tax code. This use of the term confuses two very different phenomena and muddies policy discussions about tax reform.

[Read the full story here, at Mercatus Center]

A new study from the Mercatus Center at George Mason University examines the current accounting of tax expenditures, presents case studies of some corporate tax expenditures, and proposes reforms to reduce favoritism in the tax code. The study investigates the difference between tax expenditures that privilege a particular group at the expense of others and tax provisions that, if properly accounted for, would not be counted as tax expenditures at all.

A teller counts US dollars and Chinese 100-yuan notes at a bank in Hefei, east China's Anhui province on January 16, 2011

BACKGROUND

A corporate tax expenditure is defined as a provision in the tax code that allows a firm or group of firms to not pay a tax which would otherwise be collected.

  • The modern US tax system is built on the income tax. This system double-taxes investment and savings, distorting market decisions and slowing economic growth.
  • To correct these distortions in the income tax, some special tax provisions were created to mitigate biases against savings and investment and offset other distortions.
  • Current methods employed by Congress’s Joint Committee on Taxation (JCT) and the administration’s Office of Management and Budget (OMB) for assessing the fiscal impact of tax expenditures use the income tax as the “baseline” from which to make their count.
  • Under the current accounting methods, broadly available tax expenditures that correct for economic bias are economically indistinguishable from government-provided tax subsidies that benefit some businesses and industries at the expense of others.
  • A superior tax expenditure baseline would rely on consumption, which would provide a more equal
    treatment of economic activity and focus attention on tax provisions that truly provide unfair advantages.

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[Read the more here, at Mercatus Center]

However, even by the standards of a consumption baseline, most corporate tax expenditures are unnecessary privileges that provide unfair advantages to certain industries and firms.

  • Sixty-five percent of corporate tax expenditures privilege certain activities or industries while excluding others.
  • The proliferation of corporate tax expenditures results in disparate effective tax rates that distort consumption and investment and motivate wasteful rent-seeking.
  • The growth of tax expenditures also increases compliance costs by contributing to the lengthening of the tax code, which in the past 30 years has nearly tripled in length, from 26,300 pages in 1984 to the almost 75,000-page behemoth it is today.

Read the rest of this entry »


Déjà Vu All Over Again: Obama Falsely Takes Credit for Low Gas Prices

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WASHINGTON — In a recent stump speech for Hillary Clinton, President Obama once again took credit for increased domestic energy production and low gasoline prices:

“Remember when we were all concerned about our dependence on foreign oil? Well, let me tell you — we’ve cut the amount of oil we buy from other countries in half. Remember when the other team was promising they were going to get gas prices down in like 10 years? We did it…”

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Today, the Institute for Energy Research released an updated analysis explaining how the increase in energy production has happened despite the president’s policies, not because of them. Using a recent Congressional Research Service (CRS) report, IER’s analysis highlights the stark contrast between booming oil and natural gas production on private and state lands and the anemic production on federal lands. IER’s findings include:

  • In fiscal year 2015, oil production on federal lands was 0.8 percent more than its high reached in fiscal year 2010, while production on private and state lands was 113 percent higher.
  • Natural gas production on federal lands has not regained the high reached in fiscal year 2007. For example, it was 27 percent less in fiscal year 2015 than in fiscal year 2010, while production on private and state lands in 2015 was up by 55 percent since 2010.
  • Under the Obama administration, it takes an average of 237 days for the BLM to process a federal drilling permit.

[Click here to read IER’s full analysis.]

  • In contrast, some states approve permits within 10 business days.
  • The average number of leases issued by Obama’s BLM is almost 60 percent less than the average issued by the Clinton Administration and over 45 percent less than those issued by the Bush 43 Administration.

In recent years, oil and natural gas production on private and state lands has skyrocketed, while production on federal lands is largely in decline and has been throughout most of President Obama’s time in office. Read the rest of this entry »


Criminal Organization Celebrates Record Profits

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The federal government collected $1,476,218,000,000 in the first half of fiscal year 2016. 

 reports: Inflation-adjusted federal tax revenues hit a record $1.48 trillion for the first half of fiscal year 2016, but the federal government still ran a $461 billion deficit during that time, according to the latest monthly Treasury Department statement.

Treasury receipts include tax revenue from individual income taxes, corporate income taxes, social insurance and retirement taxes, unemployment insurance taxes, excise taxes, estate and gift taxes, customs duties, and other miscellaneous items.

In the first half of fiscal 2016, which included the months of October, November, December, January, February, and March, the amount of taxes collected by the federal government outpaced the first half of all previous fiscal years, even after adjusting for inflation. Read the rest of this entry »


[VIDEO] iPress Conference: Siri Handles Question At White House

jonathanturley writes:

…There was a wonderfully ironic moment in the White House as reporters spared with Press Secretary Josh Earnest who has been often criticized for less than forthcoming statements to the media

Here is the tape:

…Now “Siri” is getting in the act as she was heard in the midst of the press conference saying “Sorry, I’m not sure what you want me to change.” It seemed for a moment like Earnest had developed a second persona…

Source: jonathanturley.org

 


White House on Illegal Immigration vs. Reality

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WASHINGTON (AP) — President Barack Obama made some notable omissions Thursday night in his remarks about the unilateral actions he’s taking on immigration.

A look at his statements and how they compare with the facts:

OBAMA: “It does not grant citizenship, or the right to stay here permanently, or offer the same benefits that citizens receive – only Congress can do that. All we’re saying is we’re not going to deport you.”

THE FACTS: He’s saying, and doing, more than that. The changes also will make those covered eligible for work permits, allowing them to be employed in the country legally and compete with citizens and legal residents for better-paying jobs.

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OBAMA: “Although this summer, there was a brief spike in unaccompanied children being apprehended at our border, the number of such children is now actually lower than it’s been in nearly two years.”

THE FACTS: The numbers certainly surged this year, but it was more than a “brief spike.” The number of unaccompanied children apprehended at the border has been on the rise since the 2011 budget year. That year about 16,000 children were found crossing the border alone. In 2012, the Border Patrol reported more than 24,000 children, followed by more than 38,800 in 2013. In the last budget year, more than 68,361 children were apprehended.

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OBAMA: “Overall, the number of people trying to cross our border illegally is at its lowest level since the 1970s. Those are the facts.”

THE FACTS: Indeed, in the 2014 budget year the Border Patrol made 486,651 arrests of border crossers, among the fewest since the early 1970s. But border arrests have been on the rise since 2011.

The decline in crossings is not purely, or perhaps even primarily, due to the Obama administration. The deep economic recession early in his presidency and the shaky aftermath made the U.S. a less attractive place to come for work. The increase in arrests since 2011 also can be traced in part to the economy — as the recovery improved, more people came in search of opportunity. Read the rest of this entry »


Progressives in Paradise: Obama Calls for Highest Sustained Taxation in U.S. History

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(CNSNews.com) – Terence P. Jeffrey writes: In the budget proposal he presented to Congress last month, President Barack Obama called for what would be the highest level of sustained taxation ever imposed on the American people, according to the analysis published last week by the Congressional Budget Office.

Under Obama’s proposal, taxes would rise from 17.6 percent of Gross Domestic Product in 2014 to 19.2 percent in 2024. During the ten years from 2015 to 2024, federal taxation would average 18.7 percent GDP.

America has never been subjected to a ten-year stretch of taxation at that level.

Highest Sustained Taxes

In the twelve fiscal years preceding the Japanese attack on Pearl Harbor (1930 through 1941), federal taxation averaged 5.3 percent of GDP.

In the five fiscal years encompassing U.S. involvement in World War II (1942 through 1946), federal taxation averaged 16.1 percent of GDP.

In the fiscal years since World War II (1947 through 2013), federal taxation has averaged 17.1 percent of GDP. Read the rest of this entry »


Déjà Vu All Over Again: Senate Democrats Decide Not to Write a Budget Again

 (Photo by Alex Wong/Getty Images)

(Photo by Alex Wong/Getty Images)

Senate Democrats will not write a budget for 2015

One year after writing and passing the first Senate Democratic budget resolution in four years, Senate Budget Committee Chairwoman Patty Murray (D-Wash.) said her conference will not make an effort in the 2014 midterm election year.

clock-roomIn a statement, Murray said there was no reason to do a fiscal 2015 budget after the two-year deal struck in December with House Budget Committee Chairman Paul Ryan (R-Wis.).

That deal set budget ceilings for the 2014 and 2015 fiscal years. The 2015 fiscal year begins on Oct. 1.

“Fiscal Year 2015 is settled, the Appropriations Committees are already working with their bipartisan spending levels, and now we should work together to build on our two-year bipartisan budget, not create more uncertainty for families and businesses by immediately relitigating it,” Murray said.

“I went into my negotiations with Chairman Ryan hoping we could give the American people some much bigcloc2needed certainty after years of lurching to crisis to crisis, and I was very glad that our two-year budget deal accomplished that,” she added.

House Republicans are planning to do a budget, however. Speaker John Boehner (R-Ohio) said Thursday he “expects” it to be done.

That will set up a contrast with the Senate, where Republicans for years criticized Democrats for not doing a budget. Read the rest of this entry »


The ‘most disturbing sentence uttered during the debt ceiling debate…’

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JOHN HINDERAKER: As Tyler Durden notes, this is the “most disturbing sentence uttered during the debt ceiling debate/government shut down.” America is now going on $17 trillion in debt, a level of insolvency that would already be regarded as catastrophic if the Fed were not keeping interest rates close to zero.

Read the rest of this entry »


Morale plummets as wave of retirees leave federal workforce

Wave of retirements hits federal workforce - The Washington Post

Damian Dovarganes/AP – Many of air traffic controllers are hitting their mandatory retirement age of 56.

By 

A wave of retirements by senior federal employees has begun rolling across the government as aging baby boomers who held on to their jobs during the economic downturn are increasingly calling it quits.

With retirement accounts on the rebound, many veteran workers are finding little reason to remain in government, especially at a time when agency budgets are being slashed, workers are being furloughed and morale is tumbling.

The number of executive branch employees retiring this fiscal year, which ends next month, is on track to be nearly twice the total who retired in 2009, according to government figures. And the rate looks certain to accelerate. In 2000, about 94,000 people age 60 and older worked for the government. Last year, the number was 262,000. Read the rest of this entry »