The Unrelenting Corporate Welfare Lobby
by Robert S. McIntyre
The American Prospect, May 6, 2002
It's not often that I agree wilth Rep. Bill Thomas, THE Republican
Chairman of the House Ways and Means Committee. But we're in complete
agreement that-contrary to what you may have read in the papers-the
so-called stimulus bill Congress enacted in March showers money
on corporations while offering only crumbs to unemployed workers.
At the end of last year, it seemed that Senate Democrats had
stymied efforts by the Bush administration and congressional Republicans
to use the economic slowdown as an excuse to pass more regressive
tax cuts, this time mostly for big business. As winter waned,
there was improved economic news and growing federal budget problems.
On top of that, Enron-inspired public outrage about corporate
tax avoidance appeared to make the idea of new corporate welfare
Yet just as Federal Reserve Chairman Alan Greenspan pronounced
the short-lived recession over, congressional Republicans and
Democrats cut a backroom deal to pass virtually the same package
of corporate tax breaks that Democrats had railed against since
The story line in the press was positivelyweird. "House
GOP Relents in Fight over Stimulus" read The Washington Post's
March 7 front-page headline. The revised stimulus bill, the Posttold
its readers, "will focus largely on new benefits for unemployed
Being naturally suspicious, I examined the actual legislation
as soon as I arrived at my of fice. I was appalled to discover
that, along with $15 billion in extended unemployment benefits
over the next three years, the bill included the same $114 billion
in corporate tax cuts over three years as last fall's version.
In a quixotic attempt to correct the Post's misinformation, I
rushed out a press release headlined "House GOP Corporate
Tax Slashers Unrelenting."
Meanwhile, on the House floor, Thomas thundered, "No,
we are not relenting." He said that by his calculation, only
7 percent of the bill's cost would go to helping the unemployed,
while the "remainder is for reduction of taxes to ... business.
And only The Washington Post could say that 7 percent of something
is largely focused on [the unemployed]. That shows you how far
off The Washington Post is."
The bill swept through the House by a 417-tO-3 margin (only
three Blue-Dog, deficit-hating Democrats voted nay), and it passed
the Senate the next day 85-to-9.
So in the end, the corporate lobbyists and their allies got
what they most wanted, a 30 percent increase in corporate depreciation
write-offs in each of the next three years, tax breaks for multinational
corporations that use offshore tax havens, and measures that make
it easier for companies with lots of loopholes to apply for rebates
of taxes paid in the past. These provisions are supposed to expire
in a few years, but experience suggests they're more likely to
be routinely extended in perpetuity.
The changes that Democrats accepted in such a blase manner
will wipe out more than one-fifth of otherwise expected corporate
income tax payments over the next three years. As a result, corporate
income taxes are expected to fall to only 13 percent of the GDP
this year and next. That's the lowest level since the early Reagan
administration and the second lowest in the last six decades.
No one should doubt that the number of big profitable corporations
paying nothing (or virtually nothing) in taxes will skyrocket.
What did the Democrats get in return? Well, there are the
extended unemployment benefits. But almost everyone agrees that
would have happened anyway. In any case, $ 8 in corporate tax
cuts for every dollar allocated to the unemployed seems like an
awfully high price to pay.
Which is not to say there were no important changes in the
final bill. It dropped the previous bipartisan agreement to extend
last year's tax rebates to low-income workers. It abandoned efforts
to help pay for health-insurance coverage for laid-off workers,
which had become entangled in a dispute over whether the aid should
be delivered through direct subsidies or, as Republicans insisted,
be administered by the IRS through tax credits. On a more positive
note, the bill didn't speed up the reduction in the individual
tax rate (the 27 percent rate is eventually scheduled to fall
to 25 percent).
Kent Conrad of North Dakota, one of the few Democratic senators
principled enough to vote against the corporate giveaways, complained
that they cost too much and come too late to stimulate anything.
And, he noted, "every dime will be coming out of the Social
Security trust fund." Good arguments, all, but apparently
not enough to sway many votes. Indeed, New York Democrat Charlie
Rangel made the same rhetorical points on the House floor and
then voted for the bill anyway.
So here we are, with corporate taxes down to historically
low levels, last year's big upper-income tax cuts phasing in,
and deficit spending and raids on the Social Security trust fund
as far as the eye can see. The Bush administration's relentless
drive to reprise "That Early'80s Show" continues unabated.
ROBERT S. MCINTYRE is the director of Citizens forTax Justice.