The Anticipated Corporate Tax Package: Watch Out For Gimmicks and Giveaways

Publication Date: October 2004

Publisher: Center on Budget and Policy Priorities (Washington, D.C.)

Author(s): Joel Friedman

Research Area: Banking and finance

Keywords: Corporate taxes; Tax code; Economic projections

Type: Report

Abstract:

A Congressional conference committee, chaired by House Ways and Means Chairman Bill Thomas, is scheduled to meet late on October 4 to finalize a package of corporate tax changes. The package will raise revenue primarily by repealing an export subsidy that the World Trade Organization has ruled to be illegal, closing some corporate tax shelters, and extending expiring user fees. It will use these savings not to reduce the deficit or to address other national priorities, but to provide a raft of new tax breaks, primarily for corporations.

Chairman Thomas has indicated that the final package will be “revenue neutral.” The Senate deserves credit for pushing the House to agree to this goal, as the House-passed package would have explicitly increased the deficit. The key issue, however, is whether this goal will be achieved without resorting to budgetary sleight of hand. Those assessing the package emerging from conference should be on the look-out for various gimmicks and maneuvers that are likely to be employed to produce an official “score” of budget neutrality, but that could obscure the package’s real long-term impact on the budget. Since 2001, the Congressional leadership has consistently employed budget gimmicks to hide the true cost of tax cuts, thwarting the efforts of those seeking to impose some degree of fiscal restraint in response to a worsening fiscal outlook.