The Story Behind the Story of Those Huge Corporate Tax Cuts

Capitol Hill by night, August 11, 2012. (Image: Flickr/ Paul Arps)

The Story Behind the Story of Those Huge Corporate Tax Cuts

Last week, Igor Volsky reported for Think Progress that Senate Majority Leader Harry Reid (D-Nevada) had struck a deal with House Republicans to give corporate America a massive tax giveaway just weeks after the midterm elections. The agreement, wrote Volsky, "would permanently extend relief for big multinational corporations without providing breaks for middle or lower-income families." Writing in TheWashington Post, Jared Bernstein, a former economic advisor to Vice President Joe Biden, called the package "a dog's breakfast of permanent tax breaks mostly for businesses that would add over $400 billion to the 10-year budget deficit without doing anything for low-income, working families."

He wasn't alone in panning the deal. Treasury Secretary Jack Lew told Volsky that the cuts would be "fiscally irresponsible." The 10-year, $444 billion package includes a few provisions that were popular with Democrats, but would phase out existing tax credits for clean energy development. Mostly, it's a boon for some of the top corporate tax-avoiders in America. Some 90 percent of the cuts would benefit their bottom lines. One of the biggest beneficiaries would be GE, which, according to Citizens for Tax Justice, claimed tax refunds of $3.1 billion on $27.5 billion in profits between 2008 and 2012. That means the company had a negative tax rate of 11 percent. Other big winners would include Wall Street financial firms, pharmaceutical companies and computer and Internet businesses.

And while Republicans insist that things like disaster relief and unemployment benefits be "offset" with cuts to other programs, these breaks would not be. The resulting deficits would then be used to justify deeper cuts to programs that have already been starved by "sequestration" -- health care, education and assistance for the poor. Jared Bernstein called that "a particularly nefarious twist." And, as if to add insult to injury, The New York Timesreported that Republican negotiators announcedthat they were stripping away an expanded earned-income credit and a child tax credit, two measures that help keep poor working families above the poverty line. The proposed cuts were in retaliation for Obama's executive action on immigration.

Once the story broke, Harry Reid's office denied that a deal had been struck. The White House quickly issued a veto threat. And one Democratic strategist who asked not to be identified told that shortly after Volsky's story was published, administration staffers were sending out emails to allies excoriating the deal. He noted that it was an unusual response for an administration that values message discipline and is typically deliberative in crafting responses to these kinds of legislative proposals.

It's quite possible that the Democrats floated the story of this corporate giveaway in order to knock it down. Perhaps they were trying to draw heat away from Obama's controversial immigration order, or establishing a narrative for the next two years -- that the new Congress would exhibit the same "culture of corruption" that Democrats used to their advantage during the 2006 elections. That's speculative, but there's another angle to this story which isn't: a major reason this package of "tax extenders" has political salience is that earlier this year, several progressive groups that advocate for a fairer tax system decided to make them an issue.

They're called "tax extenders" because these corporate handouts require congressional renewal every year or two. In the past, they've been quietly approved again and again with large bipartisan majorities and virtually no public attention. One of them, the research and experimentation tax credit, has been extended by Congress 15 times since it was first enacted in 1981. As the Congressional Research Service noted last year, the purpose of making tax provisions temporary is to evaluate their effectiveness, but that goal "is undermined if expiring provisions are regularly extended without systematic review, as is the case in practice."

It's an example of the kind of quiet corruption that frequently passes without notice in Washington, DC -- largely because it lacks the drama of a partisan fight. Last year, Harry Reid and Senate Minority Leader Mitch McConnell both came out in favor of extending the cuts without paying for them.

The late Supreme Court Justice Louis Brandeis famously wrote of government transparency that "sunlight is said to be the best of disinfectants," and in March, as the Senate Finance Committee prepared to vote on extending the tax cuts, Public Campaign and Americans for Tax Fairness (ATF) launched an effort to bring some much-needed exposure to this legislation. "This year, we made a concerted effort to raise awareness, to raise discomfort and to carry on a good fight against these tax breaks that were usually rubber-stamped every year," says Frank Clemente, executive director of Americans for Tax Fairness. Clemente added that in the past, he'd "been shocked by how comfortable and desirable these tax break were for both Republican and Democratic members of Congress."

The two groups issued a blistering report detailing not only what the tax extenders would do, but also exposing the massive lobbying campaign that was pushing them through Congress. Using data from OpenSecrets, the report's authors noted that "1,359 individual lobbyists swarmed Capitol Hill to press members of Congress on the issue between January 2011 and September 2013." That means that about 10 percent of all registered federal lobbyists worked on advancing this one piece of legislation. The report also pointed out that "58 percent of the lobbyists who worked on tax extenders have passed through the revolving door - they have worked for Congress or the executive branch." These included some heavy hitters on Capitol Hill -- people like former Sen. John Breaux (D-LA), who sat on the Senate Finance Committee for over a decade, and former Senate Majority Leader Trent Lott (R-MS).

Public Campaign and Americans for Tax Fairness worked hard to get the public's attention. "We did as much retail work as possible," Frank Clemente told "We held press briefings and did one-on-ones with reporters to make sure that they understood the story. It's like grassroots organizing -- you have to do a lot of organizing to get the media engaged on issues like this." (We first wrote about the extenders after one of their media calls in early April.) The progressive Center for Budget and Policy Priorities followed up with a damning analysis a few weeks later. And while these efforts didn't make the extension of a bunch of corporate tax cuts a big issue for average Americans, it certainly put them on the radars of many political reporters, who were well equipped to write about them when Volsky's story broke last week.

It's possible -- or even likely -- that, absent this effort, Congress would have extended these cuts yet again, perhaps permanently, with little notice and no public outrage. And these cuts may pass yet -- attached to some veto-proof legislation, or as part of a broader "tax reform" between the White House and the new Republican congressional majority. But we saw last week that a group of organized advocates can turn a non-issue into a matter of public controversy, and, at a minimum, make things a bit more difficult for what journalist David Sirota called "the money party" that dominates Washington, DC.

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