Update: The House Ways and Means Committee passed the extender bills on a party line vote, with Republicans in favor.
On Thursday, The House Ways and Means Committee will once again contemplate making permanent controversial tax breaks that overwhelmingly benefit big business at a cost of $380 billion over the next 10 years.
Known as tax extenders, these giveaways are a package of tax breaks that Congress must vote to restore every two years. Most of the tax breaks expired at the end of 2014, but many members of Congress are doing everything they can to resuscitate these ill-advised breaks before the end of this congressional session.
Most notably, the committee will consider bills making permanent the “active financing” loophole and the CFC look-through rule. These esoteric names may mean something only to tax policy wonks and corporate accounting departments, but their impact on the federal budget has implications for us all. The active financing loophole allows multinational corporations to cook their financial books in a way that makes it appear that they are generating income in low-rate foreign tax havens while their costs are deductible in the United States. And the “CFC look-through” rule gives companies additional options for offshoring their profits on paper. An exhaustive Senate investigation into Apple’s international tax avoidance found that the CFC look-through rule is a key part of the company’s tax-dodging strategy.
The committee also will consider extending “bonus depreciation” rules allowing some companies to immediately write off their capital investments. Proponents attempt to justify this tax break by claiming it incentivizes businesses to invest more and create jobs, but the non-partisan Congressional Research Service has found it to be a “relatively ineffective tool for stimulating the economy.” And depreciation tax rules are one of the main reasons big utilities and other corporations are able to avoid paying even a dime in federal and state income tax, despite being hugely profitable.
The committee meeting comes just a day after new Census data documented that wealth remains concentrated at the top, poverty remains at historical highs and real median income is less today than it was in 1999. But it’s not a hopeless situation. Tax policy can make a difference. This hearing should have been an opportunity for lawmakers to renew the extender tax breaks that actually offer a meaningful benefit to low-income working families: the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) expansions that are set to expire at the end of 2017.
While corporate lobbyists and their congressional allies cannot back up their claims that these controversial business tax breaks stimulate the economy and create jobs, the EITC and CTC are proven to make a real difference in the lives of working Americans, lifting almost 10 million Americans above the poverty line in 2014. But the value of the EITC and CTC is set to fall substantially in just two years. If members of Congress truly want to focus on using the tax code to create widespread economic prosperity, they should make permanent these valuable tax provisions and stop their razor-sharp focus on helping big multinationals avoid paying their fair share.