Halftime for the federal budget super bowl
Congress dropped the ball in the midst of football season when it failed to strike a deal that provided sufficient revenue to invest in the creation of jobs and the 21st century infrastructure our nation so sorely needs. The Federal Budget Super Bowl is only at half-time. If you are a fan of small business and a better economic future, it’s time to make a lot more noise.
The fiscal cliff deal agreed to at the start of the year took only small steps towards the policies advocated by many in the small business community. It restored the Clinton-era top income tax rate for the richest 1 percent of Americans, but this move toward a fairer tax system was undermined by continuing cuts to dividend taxes and the estate tax that overwhelmingly benefit high-income Americans and reduced funds available for investment or deficit reduction.
More than 97 percent of small business owners make less than $250,000 a year. The continued tipping of the tax system toward affluent taxpayers is a long-term loss for Main Street businesses. It increases the pressure to cut government spending that businesses as well as middle class and working class families depend on — like roads, bridges, safe drinking water and other public infrastructure. Less investment in public infrastructure also means fewer construction and maintenance jobs, which means fewer customers with income to spend at Main Street merchants.
There were benefits in the fiscal cliff deal for small businesses, particularly those seeking a greener economy. The renewable energy tax credits were extended, for example, providing incentives for energy efficiency. Some small businesses receive benefits from bonus depreciation and research-and-development tax credits.
But Congress also delivered economically unproductive gifts to big business patrons. It included subsidies for NASCAR track owners, Hollywood movie producers and Puerto Rican rum producers. And Congress continued irresponsible incentives to shift jobs and profits offshore: The Active Financing Exception and the Controlled Foreign Corporation Look-Through enable companies like General Electric, Apple and Google, to legally shift their U.S. profits to offshore tax havens where they are lightly, if at all, taxed. Corporate tax haven abuse costs the U.S. Treasury nearly $100 billion a year, an amount of money that far outpaces proposed savings from cutting Social Security benefits, which is a terrible idea.
As we head into the second half of the Federal Budget Super Bowl, we expect corporate tax issues to be on the line of scrimmage. Fortune 500 CEOs have been coming to Washington in numbers not seen in more than a decade. They have been pleading their case for DEEP cuts in corporate tax rates and for a permanent tax holiday for offshore income from U.S. taxes (known in DC-speak as a territorial tax system) — much of it income that is generated in the U.S., but is shifted offshore using special accounting tricks.
When polled last year, 90 percent of small business owners across the political spectrum said that big businesses do not pay their fair share of taxes. Last month, more than 600 small business owners signed a letter to Congress and the President calling for corporate tax reform that would deliver more revenue for investing in the economy. The letter, co-sponsored by the American Sustainable Business Council, Business for Shared Prosperity and the Main Street Alliance, called, for example, for closing the unproductive offshore tax loopholes that allow large corporations to lower their tax bill or avoid taxes altogether.
But the small business underdogs are in for a tough fight in the final half of the game. Through coalitions, such as Fix the Debt, and individually, corporations like Google and Pfizer are geared up to continue lobbying hard for massive tax giveaways.
Unlike football, the outcome of this policy fight will have a profound and lasting impact on our economy. When it comes to the Federal Budget Super Bowl, the stakes are high and we all need to be players.
Klinger is Tax Policy Director for the American Sustainable Business Council.
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