As the nation begins to contemplate the true impact of the "$350
billion" tax cut, some serious questions about the fiscal future of our
government have begun to emerge. President Bush and other
anti-government politicians like Tom Delay have indicated that this is
the first of many tax cuts to come. They sold the tax cuts by repeatedly
pounding dubious themes like "jobs and growth" and "stimulating the
economy." Maybe they are sincere. But most economists agree that
profligate tax cuts geared toward the very wealthy are a weak economic
stimulus at best.
There is reason to believe that there is something more going on here
than a misguided attempt at economic stimulus. There is reason to
believe that these politicians actually have little interest in
collecting any taxes, that they would prefer to see the government
flounder and atrophy, shedding popular programs that benefit the poor
and middle class like education and healthcare and even social security.
This suspicion was strengthened recently when we learned that the
Administration suppressed a study commissioned by its own Department of
Treasury, which projected a future budget deficit of $44 trillion.
Perhaps the best example of this in the tax bill was the way that a
provision to close the loophole that allows U.S. corporations to move
their headquarters to an offshore tax haven through a paper transaction
disappeared from the bill behind the closed doors of the House-Senate
conference compromise brokered by Vice President Dick Cheney.
This corporate tax dodge is one of those issues that should have been a
political slam-dunk. This scam is projected to cost taxpayers billions
of dollars a year and allows companies already well-known for having
diminished ethical standards, such as Tyco and Global Crossing, to avoid
paying their fair share of taxes. There are few politicians who could
seriously get up and say that it's a good idea to allow corporations to
move offshore to cheat on their taxes, especially when a simple
legislative fix would stop it.
But although the Senate version of the bill included provisions to close
the loophole, the compromise bill did not. Other Senate provisions to
crack down on corporate tax cheating, such as strengthening the IRS's
ability to go after tax shelters or preventing corporations that
overstated their earnings from getting a rebate, also disappeared. But
the disappearance of the offshore tax haven loophole provision is
especially telling because it is such a clear-cut issue. The refusal to
deal with this is certainly a telling indication that the leading powers
in Washington simply have no interest in collecting taxes from the rich
or corporate paymasters. If U.S. companies (like drug dealers and
terrorists) are keeping their taxes safely buried on some island nation,
apparently it is none of the government's business. Our leaders, it
appears, would rather pile up a deficit.
This is not the first time that dealing with offshore tax cheats has
been removed from a bill in conference. Last year, both the House
Defense spending bill and the Senate Homeland Security spending bill
included provisions to ban government contracts for corporations that
have moved their headquarters to offshore to avoid taxes. Both
provisions somehow disappeared behind the closed door of conference
As a result, corporations headquartered in offshore tax havens continue
to get lucrative contracts from the U.S. government - approximately $1
billion worth last year, according to a recent Associated Press
analysis. The leading offshore beneficiary of government contracts is
Accenture (formerly Arthur Andersen consulting), which counts a
consulting job for the IRS among its many contracts.
Jonathan Grella, spokesman for House Majority Leader Tom Delay
(R-Texas), has said that the offshore reincorporation issue should be
addressed - but as part of an overhaul of the tax system. Meaning: Delay
believes the solution is to eliminate corporate taxes altogether. If
that happens, someday our children will ask how we let the corporate
expatriates and the rich sail away like pirates in the Caribbean, while
the budget for their schools as well as other programs like Medicare and
veterans benefits somehow disappeared into a Bermuda tax triangle.
Lee Drutman of
can be contacted at: