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 subsidies impolitic.

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 October.

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 workers."

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.

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