Biggest US Tax Reform in Decades

[Timber Loftis]

Using a WTO ruling against a $5 billion tax cut to US exporters as an excuse, the administration and Congress have today passed the biggest corporate giveaway and tax reform since 1986. And the little oil monkee certainly included the oil companies in his project! Not only that, they provide even more incentive to offshoring. Assholes, all of them. I can't decide which I hate more, corporations or my government. I just wish they'd both quit screwing me long enough for me to figure it out.

October 22, 2004
Bush Signs $136 Billion Corporate Tax Cut Bill
By THE ASSOCIATED PRESS

Filed at 12:30 p.m. ET

WASHINGTON (AP) -- With no fanfare, President Bush on Friday signed the most sweeping rewrite of corporate tax law in nearly two decades, showering $136 billion in new tax breaks on businesses, farmers and other groups.

Intended to end a bitter trade war with Europe, the election-year measure was described by supporters as critically necessary to aid beleaguered manufacturers who have suffered 2.7 million lost jobs over the past four years.

But opponents charged that the tax package had grown into a massive giveaway that will add to the complexity of the tax system and end up rewarding multinational companies that move jobs overseas. It also will swell the nation's huge budget deficit.

There was no ceremony for the bill-signing. White House press secretary Scott McClellan announced it on Air Force One as Bush flew to a campaign appearance in Pennsylvania. The handling of the corporate tax bill was in contrast to Bush's action on Oct. 4 when he sat before television cameras on a stage in Des Moines, Iowa, to sign three tax-cut breaks popular with middle-class voters and reviving other tax incentives for businesses.

Bush's campaign rival, Sen. John Kerry, missed the vote on the corporate tax breaks. Kerry spokesman Phil Singer said there were many important things in the bill but that ``George Bush filled the bill up with corporate giveaways and tax breaks for multinational companies that send jobs overseas. In his first budget, John Kerry will call for the repeal of all the unwarranted international tax breaks that George Bush included in this bill.''

The original purpose for the legislation was to repeal a $5 billion annual tax break provided to American exporters that was ruled illegal by the Geneva-based World Trade Organization. Repeal of the tax break was needed to lift retaliatory tariffs that are now being imposed on more than 1,600 American manufactured products and farm goods exported to Europe.

The bill replaces the $49.2 billion export tax break with $136 billion in new tax breaks over the next decade for a wide array of groups from farmers, fishermen and bow and arrow hunters to some of America's largest corporations.

The legislation also includes a $10.1 billion buyout of quotas held by tobacco farmers. However, a Senate provision that would have coupled this buyout with regulation of tobacco by the Food and Drug Administration was dropped by the conference committee that ironed out differences between the two chambers.

The measure is the most sweeping overhaul of corporate tax law since 1986. It provides a wide range of tax benefits for native Alaskan whalers, importers of Chinese ceiling fans and NASCAR race track owners.

The centerpiece is $76.5 billion in new tax relief for the battered manufacturing sector, but manufacturing is broadly defined to include not just factories but also oil and gas producers, engineering, construction and architectural firms and large farming operations.

The bill was seen as must-pass legislation because it repeals a $5 billion annual subsidy for U.S. exporters that has been ruled illegal by the World Trade Organization. Because of that ruling, 1,600 American exports to Europe have been hit by penalty tariffs that now stand at 12 percent and are rising by 1 percentage point a month.

In addition to the $76.5 billion in tax relief for manufacturing, the measure would also provide $42.6 billion in tax relief to multinational companies.

Supporters argued that the tax relief for multinational corporations would boost the competitiveness of U.S. companies, but opponents argued that it would simply provide more tax benefits to support the movement of U.S. jobs overseas.

To pay for the $136 billion total of new tax relief over the next decade, the legislation would rely on the savings from repealing the export subsidy and would close corporate loopholes and tax shelters -- thereby raising an estimated $82 billion over the next decade.

[Azred]

Originally posted by Timber Loftis: I can't decide which I hate more, corporations or my government.

Perhaps this might help you decide: corporations want only your money. [img]graemlins/petard.gif[/img]

Ideally as a capitalist society we should support benefits to business, but these tax breaks will have an effect only on large corporations rather than small- and medium-cap companies. This is another event in the continuing story of American businesses being too short-sighted, keeping an eye only on next quarter's bottom line. Seriously, are there any businesses out there who truly have a long-range vision?
Of course, this philosophy isn't completely corporate's fault. If individual investors weren't so rabid for profits that are both immediate and large then boards of directors would arrange things differently. Naturally, the average individual investor really doesn't understand the big picture, ecomonically.

I really do support capitalism, but like any philosophy it has its limitations and its faults. Well...my philosophy doesn't, but I am also arrogant and elitist. [img]tongue.gif[/img] [img]graemlins/petard.gif[/img]

[Stratos]

Originally posted by Azred: This is another event in the continuing story of American businesses being too short-sighted, keeping an eye only on next quarter's bottom line. Seriously, are there any businesses out there who truly have a long-range vision? Of course, this philosophy isn't completely corporate's fault. If individual investors weren't so rabid for profits that are both immediate and large then boards of directors would arrange things differently. Naturally, the average individual investor really doesn't understand the big picture, ecomonically.

You took the words out of my mouth on this one, Azred, although I want to add that this apply to corporations all around the world, not just American ones.

I really do support capitalism, but like any philosophy it has its limitations and its faults. Well...my philosophy doesn't, but I am also arrogant and elitist. [img]tongue.gif[/img] [img]graemlins/petard.gif[/img]

Words coming from someone with a joint in his mouth.

[Azred]

Better to have a joint in one's mouth than to have one's mouth in the joint. [img]graemlins/beigesmilewinkgrin.gif[/img]

[John D Harris]

T.L. here's another view on the evil's of outsourcing, here in Alabama 3 major world (Non-U.S.) auto makers have out sourced jobs, from their countries to the heart of Dixie. In other words some U.S. companies send jobs overseas, but overseas companies send jobs here also. It's a two way street, and plain SMART business to move your plants closer to the consumer and cut shipping/import costs, or move your plants to cut labor costs. When I was a kid a simple calculator, not a fancy one but one that only added, subtracted, multiplied, and divied cost upwards of $150! That's 1972 dollars! They were calculators made in the U.S., now you can pick up a simple calcuator for $2, made someplace else. The reality is ALL people want better for cheaper, if anyone has any doubt about that go trade in you current computer, with pieces-parts made all over the world cheaply. Buy the manufacturing equiptment (NOT THE pieces-parts already made by some company outsourcing the labor) needed to make everything on in a computer and build your own. In other words do it ALL you own damnself.

[Azred]

True, Mr. Harris, companies do straddle both sides of the outsourcing fence and realize economic benefits for doing so. However, the end result of this will be to cause a dramatic rise in unemployment here in America because it will almost always be cheaper to move out of the country to take advantage of lower operating costs and reduced wages/benefits offered to employees. The only way to combat this right now is to offer tax breaks, because it would be illegal to lower wages or benefits here as many are Federally mandated. Are Americans willing to work for only $4 per hour? Or $1.50 per hour?
On the other hand, if a company moves elsewhere they might find that those employees will eventually learn they can unionize and strike for increased wages/benefits; at that point the cost of moving back might be prohibitively expensive.

In short, to remain competetive here then companies need to begin finding other ways of being more resourceful and trimming the expense budget--lowering executive salaries is one place to start while repurchasing stock to reduce investor dividends is another.

I still think many American companies don't have a rational or realistic long-term vision. Neither do they have the cajones to set one and stick to it that will propel them into the 22nd century.

[Timber Loftis]

Originally posted by Azred: True, Mr. Harris, companies do straddle both sides of the outsourcing fence and realize economic benefits for doing so.

True

However, the end result of this will be to cause a dramatic rise in unemployment here in America because it will almost always be cheaper to move out of the country to take advantage of lower operating costs and reduced wages/benefits offered to employees.

True

The only way to combat this right now is to offer tax breaks, because it would be illegal to lower wages or benefits here as many are Federally mandated. Are Americans willing to work for only $4 per hour? Or $1.50 per hour?

Untrue. The World TRADE Organization's current stance is that it only regulates TRADE. However, cost of labor, conditions of labor, and other externalities (such as the environmental harm resulting from operations) are true and real costs associated with production. There are 3 solutions: (1) lobby and harrass the WTO to take account of more factors when it regulates "trade," and demand it allow for a country to take these factors into consideration when setting tarriffs (which will result in more countries trying to meet minimum labor/wage/environmental standards to avoid a tariff, thereby increasing the global standard of living)(and... which can be done under the existing WTO regime with minor modifications to the treaties), or (2) let the market sort itself out over time, which will require abandoning the WTO which is *regulated* trade, not pure free trade, or (3) having other international bodies like the WTO (such as a World Labor Organization and World Environmental Organization) step in to regulate the externalities left out of the equation by only regulating pure *trade.*

On the other hand, if a company moves elsewhere they might find that those employees will eventually learn they can unionize and strike for increased wages/benefits; at that point the cost of moving back might be prohibitively expensive.

This is option # 2 on my list. I advocate option #1 as the most expedient means, and option #3 as the next best alternative. For option #2, it will take a long period of time.

In short, to remain competetive here then companies need to begin finding other ways of being more resourceful and trimming the expense budget--lowering executive salaries is one place to start while repurchasing stock to reduce investor dividends is another.

Not really going to happen. Despite our efforts in all fields to cut costs here, other factors such as labor and environmental costs cannot be avoided. No matter how much you ask and American to do with his professional hour, it cannot compete with wages set at 1/10th our level of compensation.

I still think many American companies don't have a rational or realistic long-term vision. Neither do they have the cajones to set one and stick to it that will propel them into the 22nd century.

Agreed. Long-term vision is foreign to American companies, which are inherently set up on the "make money now for your stockholders" system. There's a Japanese company that bought the rights to use the bottom of Tokyo bay, and is currently storing old-growth forest down there, where those valuable big pieces of wood will be preserved indefinately. That is a 50-year corporate vision unakin to our way of thinking. Unfortunately, they are clear-cutting small Pacific islands to get their trees, which is an environmental disaster waitin to happen. So, as always, some good, hand-in-hand with some bad.

[Azred]

Originally posted by Azred: The only way to combat this right now is to offer tax breaks, because it would be illegal to lower wages or benefits here as many are Federally mandated. Are Americans willing to work for only $4 per hour? Or $1.50 per hour?

Originally posted by Timber Loftis: Untrue. The World TRADE Organization's current stance is that it only regulates TRADE. However, cost of labor, conditions of labor, and other externalities (such as the environmental harm resulting from operations) are true and real costs associated with production. There are 3 solutions: (1) lobby and harrass the WTO to take account of more factors when it regulates "trade," and demand it allow for a country to take these factors into consideration when setting tarriffs (which will result in more countries trying to meet minimum labor/wage/environmental standards to avoid a tariff, thereby increasing the global standard of living)(and... which can be done under the existing WTO regime with minor modifications to the treaties), or (2) let the market sort itself out over time, which will require abandoning the WTO which is *regulated* trade, not pure free trade, or (3) having other international bodies like the WTO (such as a World Labor Organization and World Environmental Organization) step in to regulate the externalities left out of the equation by only regulating pure *trade.*

Another beautiful opinion killed by an ugly fact. Spoilsport. [img]tongue.gif[/img] [img]graemlins/beigesmilewinkgrin.gif[/img]

Another huge problem with trying to regulate an economy or a trade web is that the people making predictions about future trends based on current circumstances can already predict what agencies like the WTO will do, so they factor the agency's decision into their predictions. The predictions, naturally, have an effect on the decisions made by the agency--a self-referential system, thus very difficult to control with any degree of accuracy. I suspect that if an in-depth long-term analysis of an economy were done, the effect of regulation would be negligible compared to market factors.

Although I would like to see how workers striking for increased wages or becoming unionized would work in other parts of the world from a socio-political point of view, people everywhere have become more trigger-happy since Poland's Solidarity movement. It would be...bad.

[John D Harris]

Originally posted by Azred: I still think many American companies don't have a rational or realistic long-term vision. Neither do they have the cajones to set one and stick to it that will propel them into the 22nd century.

No disagreement Here, a short walk through history show us that, what happened to the Horse whip companies when the automobile was invented? Or the sliderule companies when the Calculator was invented? Most businesses don't understand what they are really doing/producing. If the sliderule companies understood what the product was they were producing they would have been the ones to invent calculators, and computers. Sucessful companies are the ones that set the future not the ones that the future overtakes. Unfortunatly sucessful companies that set the future are the very ones the people condem ie: Mircosoft, Walmart. Mircosoft saw that the world was going to need an operating system so they created one, how be it inferior to the MAC system. But Apple didn't see or acknowledge the future. Walmart saw that the people wanted stuff for less so they gave to the people, they understand their business is to sell stuff for less that people want.

[John D Harris]

Originally posted by Timber Loftis: quote: Originally posted by Azred: [qb] True, Mr. Harris, companies do straddle both sides of the outsourcing fence and realize economic benefits for doing so.

True

However, the end result of this will be to cause a dramatic rise in unemployment here in America because it will almost always be cheaper to move out of the country to take advantage of lower operating costs and reduced wages/benefits offered to employees.

True
[/QUOTE]Tell that to the nearly 10,000 employees at Mercedes, Honda, and Nissan plus the 10,000's of people who have now found employement around where those people work suppling the companies with items, and their employees with new houses, and the contractors with new cars that they can now afford becuase they have built so many new houses. The bars that have more customers in them. There is no such thing as zero sum gain economics. Once somebody spends a dollar it goes to somebody else to spend and so-forth , and so-forth,and so-forth.

The export of jobs has been an issue since the early 70's, do we have more or less employement? Has the medium income risen or fallen over the years in real dollars? The population has increased and so have jobs.