What if there were a bill in Congress which would do the following?
“Amends the Internal Revenue Code to: (1) grant business taxpayers a tax credit for up to 20% of insourcing expenses incurred for eliminating a business located outside the United States and relocating it within the United States, and (2) deny a tax deduction for outsourcing expenses incurred in relocating a U.S. business outside the United States. Requires an increase in the taxpayer’s employment of full-time employees in the United States in order to claim the tax credit for insourcing expenses.”
In short — offer corporations tax incentives to bring American jobs back to America, or S. 2569.
But then, there’s the GOP side of the aisle saying things like:
“Some Republicans argue that if Democrats truly wanted to keep companies in the United States, they would work with Republicans to overhaul the tax code and reduce corporate tax rates.“It’s a bill that’s designed for campaign rhetoric and failure — not to create jobs here in the U.S.,” Senate Minority Leader Mitch McConnell (R-Ky.) said Tuesday. “Everyone knows that the Democrats aren’t being serious here.” [The Hill]
First, Senator McConnell’s taunt, that the bill is a purely political exercise without any redeeming merit, is simply a legislative version of the Ad Hominem Attack — name calling without addressing the issue at hand. Secondly, Senator McConnell’s definition of “working with” all too often means give us everything we want and we’ll still keep filibustering a measure. To wit: The bill to require background checks and close the gun show loophole, in which the total gun safety legislative package was pared down to a single issue to appease the GOP and then the GOP filibustered the bill anyway. Or the Affordable Care Act, originally a Heritage Foundation proposal, which after numerous amendments to assuage the concerns of Senate Republicans received no support from that quarter.
Third, there’s the matter of “working with Republicans to overhaul the tax code,” which assumes that the Republicans have a plan to overhaul the tax code. The latest GOP tax proposal comes from the House, and would cut the top tax rate from 39.6% to 25%, impose a surtax on some incomes above $450,000, but leave capital gains taxes at the low rate, to the benefit of hedge fund and wealth management firms. [WaPo] However, the problem with Representative Camp’s proposal is one shared with other GOP plans (health plans, budgets) — the devils haven’t been specified in the details.
The Joint Committee on Taxation analysis indicates the ‘plan’ doesn’t specify the special interest tax breaks which litter the IRS regulations will get the axe in order to make up for revenue lost in the bracket reductions. The Camp proposal also comes with its own set of complexities, summarized in the Tax Policy Center’s analysis. To mention just one, there’s the resurrected specter of the Alternative Minimum Tax implicit in Camp’s legislation — nothing like taking up something complicated in order to make another thing simple?
Then there’s some bad news for states, such as Nevada, which do not have a state income tax:
“Camp would repeal the deductibility of state and local taxes, including both property taxes and income taxes. He’d abolish tax-exempt private activity bonds. And he’d impose a 10 percent surtax on municipal bond interest for high-income households, a step likely to raise the cost of issuing state and local debt.But Camp’s plan also includes some less obvious changes that could increase state income tax revenues, especially for states that piggyback on the federal income tax. By limiting deductions—and thus boosting taxable income—Camp’s plan could also increase state income tax revenue, just as the Tax Reform Act of 1986 did.” [Tax Policy Center]
No matter, the local and state income taxes, which Nevada doesn’t have, would no longer be deductible, but unless there is a state income tax on which to “piggy back” state income tax revenue doesn’t increase under the provisions of Camp’s bill. Thus we lose the property tax deductions, and gain very little else.
Then there’s the matter of reducing the corporate tax rate. To what? There’s the statutory rate, which Republicans are fond of citing, and then there’s what taxes cost the corporations — or, the effective tax rate. The GAO reported the effective tax rate for U.S. corporations at 12.6%. [CNN] Of course, the GOP response is “ya’shouldn’t hafta get a lawyer to figure out your taxes,” but that’s precisely what major corporations DO. And, they do it with a raft load of tax attorneys. It doesn’t seem too far out of line to suggest that if the statutory rate were to be reduced to X%, the rafts of tax attorneys would be hard at work seeing how the liability might be reduced to X-Y%.
And while we’re on the subject of complicated tax codes — it does appear a bit unseemly to have the self same initiators and protectors of tax break loopholes for corporations advance arguments that the tax code is “broken” because it is so complicated. This would be a good time to click on over to Jon Stewart’s classic rant on tax avoiding corporations, “The Inversions of the Body Snatchers.”
However, speaking of tax breaks for corporations which bring jobs back to American shores… We aren’t going to see those because the Republicans in the U.S. Senate are successfully filibustering S. 2569, and kept their filibuster going in a vote on July 30, 2014 at 10:50 AM. The cloture motion failed on a 54-42 vote, with Senator Dean Heller (R-NV) voting along with Senate Minority Leader Mitch McConnell (R-KY) to further stall the Bring the Jobs Back Bill.