Closing "corporate tax loopholes" sure sounds good to the average, non-corporate American -- so good, in fact, that politicians talk about it all the time.
House Speaker John Boehner's fiscal-cliff proposal purports to raise $1.6 trillion in revenue by "clos[ing] special-interest loopholes and deductions while lowering rates."
The White House, meanwhile, has complained that Boehner hasn't offered specific loopholes to cut.
On the other side of the aisle, House Democrats have repeatedly offered up "closing overseas tax loopholes" as a means to pay for spending bills -- a plan Republicans routinely reject. In the last two and a half years, President Obama has often been heard griping about writeoffs for corporate jets.
For both Republicans and Democrats, "corporate tax loopholes" are an old saw. But, like most things in politics, raising revenue from "loopholes" gets a bit stickier when the specifics are hashed out.
A misconception about tax "loopholes," some experts say, is that they're loopholes -- gaps in the tax law that corporations have exploited against the law's intent.
Carolyn Kaster/AP Photo; Pablo Martinez Monsivais/AP Photo
Fiscal Cliff Battle: President Obama vs. Speaker John Boehner Watch Video
"Most of these proposals were not 'loopholes,' these were incentives," said Eric Toder, co-director of the left-leaning Tax Policy Center.
For example, take the research-and-development tax credit. During the campaign, both Obama and Mitt Romney suggested making it permanent.
"One wouldn't call the research credit a loophole," Toder said.
Cashing in by closing the biggest "loopholes" could be a politically fraught endeavor. To generate meaningful revenue, House Republicans would have to sign off on measures that raised it from taxing the overseas profits of multinational corporations, from ending immediate writeoffs of equipment purchases, or from ending a credit for domestic manufacturing.
When the Joint Committee on Taxation scored some of these provisions, as part of a tax-reform bill pushed by Democratic Sen. Ron Wyden and then-GOP-senator Judd Gregg, it found the government could save significantly:
Savings Over 10 Years: 2011-2021
Taxing Overseas Profits of Multinational Corps: $582.7 billion. In other words, the "overseas tax loophole" Democrats are fond of trashing. While most countries with large economies tax only profits made at home, the U.S. code taxes all income everywhere. To offset the different, U.S. multinational corporations receive credits to prevent double taxing. They also can defer paying any tax on foreign income, until they transfer the money back to the United States.
Taxing that profit could generate significant revenue. But this could be controversial, and large corporations would fight it. A senior aide to one business lobbying group said ending foreign-income deferral would amount to double-taxing U.S. companies and put them at a disadvantage to foreign competitors; one supporter of ending deferral suggested U.S. companies have been able to hide profits overseas, avoiding taxes altogether.
Closing Tax Loopholes Not Enough to Avert 'Cliff'?
This article
Closing Tax Loopholes Not Enough to Avert 'Cliff'?
can be opened in url
http://newscardiidae.blogspot.com/2012/12/closing-tax-loopholes-not-enough-to.html
Closing Tax Loopholes Not Enough to Avert 'Cliff'?
