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Today's Top News
Corporate-Friendly Fiscal Deal Maintains Tens of Billions in Fossil Fuel Industry Giveaways
Deal manages to raise taxes on millions of working class taxpayers while preserving friendly subsidies to world's wealthiest oil, gas and coal companies
The 'ugly, ugly, ugly' fiscal agreement reached by Congress and signed by President Obama this week—which managed to extend Bush-era tax cuts for the rich, raise taxes on the working class and set up a new scenario for a repeated protracted battle over budget issues in just two months—was a big mess for most, but a big win for the fossil fuel industry.
Although Obama's initial budget proposal called for ending 13 such tax breaks, to save $46 billion over 10 years, Andy Kroll of Mother Jones reports that that these subsidies—"that pad the profit margins of companies such as ExxonMobile and BP"—were left intact by the final deal.
Ending the costliest tax breaks for oil and gas companies would have raised tens of billions of dollars in revenue. Trimming just a handful of these breaks for the big five companies—BP, Chevron, ConocoPhillips, ExxonMobil, and Shell—would've raised $24 billion over the next decade.
But lobbyists for big oil, mining companies, railroads and US multinationals were able to preserve their tax breaks, the Sunlight Foundation reports.
The bill also extends through 2013 tax breaks for coal companies that expired at the end of 2011.
According to the Sunlight Foundation: "The coal mining industry has increased its campaign contributions to federal candidates in recent years, more than tripling its giving in the past four years to more than $12 million, according to the Center for Responsive Politics."
Among other corporate handouts included in the bill were $9 billion for off-shore financing loopholes, $1.6 billion for Goldman Sachs, and tax breaks for Hollywood, computer and pharmaceutical companies.
"It flies in the face of tax reform,” Robert Bixby, executive director of the Concord Coalition, a nonpartisan budget watchdog group, told McClatchy. “Everyone is talking about closing loopholes, and they validate $30 billion of loopholes. It doesn’t bode well for tax reform.”
The subsidies were supported by members of both parties, and both Republican and Democratic lawmakers defended them following the vote.
In a widely-cited post at Naked Capitalism, the Roosevelt Institute's Matt Stoller listed eight corporate giveaways that were quietly embedded in the deal:
1) Help out NASCAR - Sec 312 extends the “seven year recovery period for motorsports entertainment complex property”, which is to say it allows anyone who builds a racetrack and associated facilities to get tax breaks on it. This one was projected to cost $43 million over two years.
2) A hundred million or so for Railroads - Sec. 306 provides tax credits to certain railroads for maintaining their tracks. It’s unclear why private businesses should be compensated for their costs of doing business. This is worth roughly $165 million a year.
3) Disney’s Gotta Eat - Sec. 317 is “Extension of special expensing rules for certain film and television productions”. It’s a relatively straightforward subsidy to Hollywood studios, and according to the Joint Tax Committee, was projected to cost $150m for 2010 and 2011.
4) Help a brother mining company out – Sec. 307 and Sec. 316 offer tax incentives for miners to buy safety equipment and train their employees on mine safety. Taxpayers shouldn’t have to bribe mining companies to not kill their workers.
5) Subsidies for Goldman Sachs Headquarters – Sec. 328 extends “tax exempt financing for York Liberty Zone,” which was a program to provide post-9/11 recovery funds. Rather than going to small businesses affected, however, this was, according to Bloomberg, “little more than a subsidy for fancy Manhattan apartments and office towers for Goldman Sachs and Bank of America Corp.” Michael Bloomberg himself actually thought the program was excessive, so that’s saying something. According to David Cay Johnston’s The Fine Print, Goldman got $1.6 billion in tax free financing for its new massive headquarters through Liberty Bonds.
6) $9B Off-shore financing loophole for banks – Sec. 322 is an “Extension of the Active Financing Exception to Subpart F.” Very few tax loopholes have a trade association, but this one does. This strangely worded provision basically allows American corporations such as banks and manufacturers to engage in certain lending practices and not pay taxes on income earned from it. According to this Washington Post piece, supporters of the bill include GE, Caterpillar, and JP Morgan. Steve Elmendorf, super-lobbyist, has been paid $80,000 in 2012 alone to lobby on the “Active Financing Working Group.”
7) Tax credits for foreign subsidiaries – Sec. 323 is an extension of the “Look-through treatment of payments between related CFCs under foreign personal holding company income rules.” This gibberish sounding provision cost $1.5 billion from 2010 and 2011, and the US Chamber loves it. It’s a provision that allows US multinationals to not pay taxes on income earned by companies they own abroad.
8) Bonus Depreciation, R&D Tax Credit – These are well-known corporate boondoggles. The research tax credit was projected to cost $8B for 2010 and 2011, and the depreciation provisions were projected to cost about $110B for those two years, with some of that made up in later years.
CBS released this news segment on special interest tax breaks in the "fiscal cliff" deal: