This week, the House of Representatives is trying to pull together a package extending several popular tax breaks as well as important social safety net provisions like unemployment benefits and health insurance subsidies for laid-off workers. The bill costs about $200 billion, but is partially offset by a few tax changes, including the closing of a loophole that allow corporations to claim U.S. tax credits on profits earned overseas.
These unjustified tax breaks have been on the radar of Congress’ tax writers for the last few years, but so far they’ve remained in the tax code due to the pressure of big corporations, which obviously want to preserve their ability to exploit the tax code’s quirks. This time, even though the bill before Congress extends some of their favored tax provisions, like the Research and Development tax credit, the Big Business lobby is at it again, fighting to preserve its ability to use tax loopholes, at the expense of its own tax credits and the extension of unemployment benefits:
International Business Machines Corp. and trade groups for major U.S. companies are pressing Congress to defeat a jobs bill containing billions of dollars in taxes on their global operations…In a letter to lawmakers yesterday, Armonk, New York-based IBM, the world’s biggest computer-services provider, told lawmakers it “strongly opposes” the legislation and would rather do without the research credit than face new taxes on overseas profits.
The Chamber of Commerce has, of course, weighed in on behalf of big business, claiming that the legislation is a “job killer.” Closing the loophole in question would raise about $14.5 billion over ten years, or about $1.5 billion per year from the entire multinational corporation community.
The choice here for Congress is pretty stark. On one side, there’s the need to extend unemployment insurance for workers at a time when long-term unemployment is at record highs and the labor market is still incredibly weak, while at the same time extending tax breaks that help companies innovate and create jobs. On the other side, there’s the ability for multinational corporations to claim U.S. credits on profits that they don’t earn here or pay domestic taxes on.
According to the National Employment Law Project, 1.2 million Americans who are currently eligible for extended benefits will have the rug pulled out from under them in June if Congress doesn’t act. Of course, for months now there has been serious hostility to extending jobless benefits (which does not create a new tier of benefits, so workers who have run the full gamut of the extended program will still see their benefits disappear). Earlier this year, Republicans repeatedly mounted filibusters of extensions, and just yesterday Sen. Judd Gregg (R-NH) said that we should stop extending benefits “right now.”