Bush’s IRS Quietly Slashing Corporate Taxes

corpii1.jpgThe Wonk Room and ThinkProgress have been documenting the many last-minute regulatory changes that President Bush’s administration is pushing through as his term winds to a close. White House spokesman Tony Fratto’s assertions aside, the changes weaken health care, workers rights, and expose the environment to further pollution and irresponsible behavior.

But the Bush administration is also making sure to wreck the tax system on its way out the door. Today, Time’s Stephen Gandel reported that, in the last year, the Internal Revenue Service has been “unusually aggressive in doing what it can to lower corporate taxes, going above and beyond what has been allowed in the past”:

The IRS this year has issued 113 notices, many of which will lower the taxes companies will pay this year and in the future. That breaks the previous record of 111 in 2006, and is nearly double the 65 issued in the last year of Bill Clinton’s presidency.

These changes “drain billions of dollars of badly needed tax revenue at a time when the federal deficit is mushrooming.” Gandel also notes that “many of the changes may lower corporate tax revenue for years to come.”

One of the more egregious examples of Bush’s various gifts to big business was a change to the tax code — enacted in the midst of the $700 billion bailout debate — which gave “American banks a windfall of as much as $140 billion.” Gandel notes that Wells Fargo will receive a $5 billion tax break from this change, while Capital One will receive a $500 million windfall.

Perhaps the largest windfall though, will come from a proposed change stating “companies that lose money in any given year are entitled to a rebate on money they have paid in taxes for the prior two years“:

For instance, in 2008 there are projected to be 107 companies in the S&P 1500 that will lose money, as much as $80 billion. About half of those companies were profitable in 2007, making nearly $30 billion as a group. That means, based on an average corporate tax rate of about 30%, those companies could receive as much as $10 billion in tax rebates from last year alone.

As the Wonk Room has noted, the tax code is already riddled with “tax loopholes, shelters, and giveaways” that minimize corporate taxes. The United States currently raises below average corporate tax revenue and will be facing record deficits and a rapidly climbing debt in the coming years. With widespread federal spending necessary to stimulate the economy, changes to further lower corporate tax revenue are ones the country can not afford.