Last week, House Majority Leader Eric Cantor (R-VA) and Sen. Jon Kyl (R-AZ) walked away from deficit reduction negotiations that were being led by Vice President Biden — even though Democrats had reportedly agreed to trillions in spending cuts — due to their insistence that a budget deal not include one dime of new revenue. As Marie Diamond explained last week, one of the suggestions that the GOP rejected was a phase-out of tax deductions and tax credits for people making more than $500,000 a year.
But it’s not only keeping taxes low on upper-income Americans that led Cantor and Kyl to blow up the negotiations. According to Bloomberg, the GOP negotiators also took exception to the administration’s proposal to end a corporate accounting gimmick that will help companies lower their tax bills to the tune of $72 billion over the next five years:
Ending the so-called last-in-first-out, or LIFO, provision, a method of accounting for inventory costs, was among options offered by White House officials for raising $400 billion in revenue over 10 years during seven weeks of negotiations led by Vice President Joe Biden, the people said, speaking on the condition of anonymity because they weren’t authorized to comment publicly…The LIFO provision was among possible revenue increases that Republicans opposed when the Biden talks, which included two Republicans and four Democrats, collapsed last week.
This particular accounting boondoggle allows companies to assume, for tax purposes, that their entire inventory was purchased for the last (most expensive) price. Thus, when they sell off their inventory, their taxable income looks smaller. International accounting standards do not allow the use of LIFO accounting, and both parties have supported its repeal in the past.
The largest beneficiary of this tax break is the oil and gas industry, which can use it to avoid $30 billion in taxes over the next five years, according to estimates by the administration. So in addition to shielding upper-income Americans from bearing any of the responsibility for deficit reduction, it seems that the GOP wants to ensure that corporate America avoids paying its fair share as well.