Half Time for the Federal Budget Super Bowl

Half Time for the Fed­eral Bud­get Super Bowl

By Scott Klinger

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 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.

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Klinger is Tax Pol­icy Direc­tor for the Amer­i­can Sus­tain­able Busi­ness Council.

Posted by Guest 2 Columnist on Jan 31 2013. You can follow any responses to this entry through the RSS Feed. Both comments and pings are currently closed.