By Dustin Hurst | Watchdog.org
HELENA — With the country teetering on the edge of a full-blown meltdown warmly known as the “fiscal cliff,” the White House busily negotiated with Congress to strike a deal, but not without stuffing billions in corporate welfare into the final product.
For the quick assist, White House staffers turned to Montana U.S. Sen. Max Baucus, a Democrat regarded as a legislative errand-boy for the nation’s corporate elite.
Don’t believe it? Ask General Electric, Diageo, the Motion Picture Association and myriad other companies benefitting from the welfare included in the cliff compromise.
Tim Carney, the Washington Examiner’s crack political reporter and columnist, provides a full rundown of just how the White House snuck $76 billion in corporate handouts into the fiscal cliff legislation.
In short, White House officials copy-and-pasted the text from Baucus’ Family and Business Tax Cut Certainty Act of 2012, shoving it into the final fiscal-cliff bill. Lawmakers had about six minutes to read the entire 154-page bill before casting votes, as Utah Republican U.S. Sen. Mike Lee pointed out, and no one in the upper chamber cried foul.
The special breaks run the gamut, from the silly to the egregious. Congress included credits for rum produced in the U.S. Virgin Islands and Puerto Rico, “motorsports entertainment complexes,” two- or three-wheeled electric vehicles and certain movie and television film productions.
On the egregious side of the scale — and the costliest — lawmakers approved a one-year extension of a loophole that helps monster companies avoid their share of federal income taxes.
The extension of the active finance exception, a favorite of GE and some of the country’s biggest banks, checks in as the most expensive handout in the package. Some analysts say this loophole costs the American government $9 billion annually.
But just what is it? In layman’s terms, the federal government taxes interest earned on profit generated overseas, but this break, created in 1997 and extended nearly every year since, waives that levy on certain types of transactions.
Advocates for this giveaway say it helps American companies create jobs overseas. Conservative and libertarian types might wax fond of this measure because they believe the federal government holds no power to tax foreign profits.
While justified in some of their ire, those same people might express horror knowing that hulking multinational corporations and banks ship their domestic profits overseas to avoid paying taxes to Uncle Sam.
Remember the unfettered populist indignation when news outlets reported that GE paid zero income taxes in 2010, even while earning $5.1 billion in domestic profit that year? This loophole contributed to that fiasco.
Corporations mean business when Congress examines this credit every few years. The Active Finance Working Group, a coalition of moneyed interests benefitting from the bypass, have reportedly paid a K Street lobbying firm more than $1.2 million to push it forward.
The lobbying firm, Elmendorf Ryan, employs at least one staffer with close ties to Baucus and his Senate Finance Committee.
Elmendorf Ryan’s tight relationship with the Montana senator paid off for at least one other group: The American Wind Energy Association.
Another fiscal-cliff provision hands at least $12 billion over the next decade to wind-energy producers that start construction on wind-energy farms. The Production Tax Credit, as it’s known, hands 2.2 cents per kilowatt hour back to producers.
Interestingly enough, GE, the nation’s largest producer of wind turbines, will likely benefit from this credit, too.
Other interests pushed their favors into the Baucus bill.
The credit for motorsports entertainment arenas probably edges others as most interesting of the bunch. News outlets dub it the “NASCAR loophole,” and rightly so. The credit, expected to cost about $78 million, allows those building or improving motorsports facilities to deduct construction costs from federal taxes.
Here’s an official explanation, via Jalopnik:
It lets race tracks depreciate the costs of things like capital improvements over a faster, seven year period, instead of a longer one, like 15 years. In the end, they pay less in taxes this way.
Of course, NASCAR wasn’t the only entertainment complex benefitting from the deal. Remember the animated mouse with the big ears?
Florida Watchdog bureau chief Yael Ossowksi reviewed the film handout earlier this week.
“The film credit, first introduced in the American Jobs Creation Act of 2004, allows production companies to deduct the first $15 million in filming costs from taxes, $20 million if the project is completed in a low-income community, according to the IRS,” Ossowski wrote.
“In 2010, Disney received $110 million through the federal tax credit, nearly 75 percent of the total $150 million allocated by Congress.”
Why did the mouse trap the money? The company’s lobbying disclosure shows it pushed Baucus’ committee and the White House for the extension.
While Disney stands as the top beneficiary of this credit, it’s not the only company reaping rewards. Analysts project this credit will cost $430 million.
While Americans busily enjoy their subsidized stops at Disney’s Magical Kingdom or the Talladega Superspeedway, why not grab a drink? Congress covers those, too.
For all the non-teetotalers out there, federal lawmakers extended the rum tax credit for produces in the U.S. Virgin Island and Puerto Rico. Here’s how it works: Congress levies a $13.50-per-gallon tax on rum produced in or imported to the U.S., or about $2 per bottle. Under the loophole, the federal government turns around and sends a good deal of that back to the governments of the two island communities, which, in turn, offer generous subsidies to producers like Diageo, which, like others, lobbied the Senate Finance Committee for the favor.
The break may cost more than $200 million.
Of course, folks need transportation to the rum store, Disney World, or the race track and, again, Congress steps in. The fiscal cliff bill includes a subsidy for two- or three-wheeled electrics vehicles able to top 45 mph. This nifty loophole hands back to purchasers up to 10 percent, or $2,500, of the tag price of the designated transports.
A silver lining exists alongside this provision, though. According to the Senate Finance Committee’s journal, the latest renewal rewrites language blocking golf carts from credit qualification.
So, there’s that.
For his part, Baucus praised the legislation’s bipartisan nature.
“My Montana bosses gave me clear marching orders: get it done — and that is what this compromise does. It isn’t perfect, but it will protect Montana families from tax hikes and give small businesses the certainty they need to grow and create jobs,” the senior senator wrote in a prepared statement.
Bipartisanship played a key role in not only the fiscal cliff deal as a whole, but also the inclusion of the special-interest handouts. Some of the Senate’s most-reliable conservatives, including Idaho Sen. Mike Crapo, South Dakota Sen. John Thune and Iowa Sen. Chuck Grassley, supported the the Baucus bill when it came to a vote on Aug. 2, 2012.
While Baucus and Montana junior Democratic Sen. Jon Tester jumped for joy at the bill’s passage into law, others were less-than-thrilled about the package, with special emphasis on the corporate handouts.
“Baucus is a crony capitalist,” the Montana chapter of Americans for Progress, a conservative activist group, gleefully tweeted last week. “Yo’ Occupiers. Where’s your outrage?”
The Wall Street Journal panned the corporate welfare, urging Republicans — at least those who didn’t vote for it on the Senate floor or in committee — to use the fiscal cliff nonsense as a rallying cry against Democrats.
“The costs of all this are far greater than the estimates conjured by the Joint Tax Committee,” the publication wrote. “They include slower economic growth from misallocated capital, lower revenues for the Treasury and thus more pressure to raise rates on everyone, and greater public cynicism that government mainly serves the powerful.”
Even the far-left joined in the Baucus-bashing. “#Corruption,” tweeted staunch progressive Bob Brigham in reference to Carney’s story.
Contact: [email protected] or @DustinHurst via Twitter.
— Edited by John Trump at [email protected]