The Six Worst Tax Cuts in the Senate Stimulus Bill
Chuck Sheketoff
The US Senate passed its stimulus bill today, and our friends at Citizens for Tax Justice quickly posted “The Six Worst Tax Cuts in the Senate Stimulus Bill” (PDF)
Here’s their two-page summary (PDF) verbatim. The full paper is only 8 pages long and is available here (pdf). Note, they don't address "bonus depreciation" because that measure is similarly in the House bill and their paper is designed to highlight the bad tax policy the Senate added in order to cut important spending.
Here's their paper:
Senate Removes Spending When It Should Remove Tax Cuts for Business and Well-Off Individuals
The economic stimulus bill that the Senate approved today includes several tax cuts that are not in the stimulus bill approved by the House of Representatives two weeks ago and which should be excluded from the final bill that goes to the President. Lawmakers who are sincere in their desire to stimulate the economy in the most cost-effective manner should seek to exclude from the final bill the following tax cuts, which economists believe will do little to boost consumer demand. The following six provisions add $124 billion (according to official projections) to the cost of the Senate’s stimulus bill compared to the House stimulus bill. The real cost of these provisions is considerably more.
1. The Alternative Minimum Tax “Patch”
Projected Additional Cost: $70 Billion
Why it Won’t Help the Economy: Bulk of benefits go to richest 10%.
The “patch” prevents the AMT from reaching more taxpayers, but seventy percent of the benefits of AMT relief go to the top 10 percent of taxpayers. Putting it in the stimulus bill allows this provision to be enacted without being paid for, adding $70 billion to the cost of the legislation and increasing the deficit unnecessarily.
2. Home Ownership Tax Credit
Projected Additional Cost: $35 Billion
Why it Won’t Help the Economy: Benefits wealthy taxpayers and could inflate housing prices.
This “flip your house to your brother” tax credit will benefit people who can already afford to buy a house, not the people hardest hit by this crisis. Or, if this tax credit really does encourage home purchases, that could reinflate the housing bubble. Isn’t that how we got into the current recession? And to get the full benefit of the $15,000 credit, a husband and wife with two children would need to have gross income of $116,500 in one year, or at least $78,250 for two consecutive years, and could not buy a house costing less than $150,000.
3. Above-the-line Deduction for Automobile Purchases
Projected Additional Cost: $11 Billion
Why it Won’t Help the Economy: Encourages debt and doesn’t target those who need help.
The “above-the line” deduction for the interest paid on a automobile loan and for the excise taxes paid on the purchase of an automobile encourages families to take on more debt. This provision would thus subsidize the sort of behavior that led to the current downturn. And it is targeted to only one industry—the automobile companies that are already getting bailout money.
4. Suspension of Tax on Unemployment Benefits
Projected Additional Cost: $4.7 Billion
Why it Won’t Help the Economy: Benefits high-earners more than families who need help.
This tax break would not help recipients who have no federal tax liability (the lower-income and long-term unemployed people). And the higher the tax bracket, the bigger the benefit. What a break for the executive that earned $200,000 or more this year before losing his job!
5. Five-year Carryback of Net Operating Losses
Projected Additional Cost (Compared to House Bill): $2.2 Billion
Why it Won’t Help the Economy: Puts more cash in the hands of business owners without changing their incentives to invest or create jobs.
This tax cut puts more money in the hands of business, but there is no correlation between a company’s cash position and its plans to invest and create jobs. Companies invest in infrastructure and hiring and training employees when they believe there will be an increase in the demand for their goods and services. No demand, no investment. The Senate bill adds $2.2 billion to the 10-year cost of this provision compared to the House version. The Senate version will cost $67.5 billion in its first two years, with paybacks thereafter. Its present-value cost is $24 billion.
6. Delayed Recognition of Certain Cancellation of Debt Income
Projected Additional Cost: $26.2 billion in first two years, with paybacks thereafter. Present value cost: $5.1 billion.
Why it Won’t Help the Economy: Rewards the behavior that got us here in the first place.
This provision benefits companies who, for whatever reason, took on excessive or risky debt. It is a huge bailout for private-equity (buyout) firms who many believe substantially contributed to the economic downturn. Other companies “leveraged their balance sheet” to pay stockholder dividends. Their stockholders should bear the loss, not the American taxpayers. Casinos are big winners, too. These are not the sort of companies Americans want to bail out.
----
CTJ notes that the Senate bill is not all bad news on the tax side . . . The full, 8-page CTJ paper lists three tax provisions that should stay in the final stimulus measure – the House improvements to the Child Tax Credit, the Making Work Pay Credit, and the modest increases in the Earned Income Tax Credit (EITC) for low-income families with three or more children and for married couples.
Read the full, 8-page paper here.
Discuss.
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Feb 10, '09
If you want to see how to really create jobs, click here
Say what you will about Mark, but his ideas make alot more sense than most.
Feb 10, '09
I'm one of the households that desarately needed the AMT relief that you claim only goes to the rich. My Family income increased to about $152K this year, putting me above the 'basic' AMT relief package that is passd as a patch every year. As such, I would suddenly owe about $8,000 more in taxes this year than under the 'regular' tax code. I just purchased a new car because I am confident that the AMT relief will happen for me this year. I certainly wouldn't have done so if I thought I was going to have to scrape together $6K next month to pay my taxes. Instead I will hopefully be spending my $2K refund. How you can say this is not a stimulus is beyond me. Yes, they need to permanently fix the AMT system, but it wouldn't happen this year without being included in this Bill. Including it was the only way to go!
3:47 p.m.
Feb 10, '09
"My Family income increased to about $152K this year, "
Guess what, pal. You ARE rich. Your household income is more than NINETY-FOUR percent of other Oregon households.
The whole idea that AMT is hurting "middle class families" is a total canard.
Feb 10, '09
We're all kulaks now, Steve.
Feb 10, '09
Don't the Democrats run every facet of our government? So what's the problem?
Feb 10, '09
Steve
I could have predicted the response you are gonna get. You are TOO wealthy. You should be taxed at an astronomical rate. YOU DON'T DESERVE THAT MUCH MONEY!!! You are evil.
Feb 10, '09
He extended a hand to the other side and suffered a vicious mauling. He may lose the hand.
4:46 p.m.
Feb 10, '09
Yes, eliminate all six of these tax cuts and reallocate the resulting $128 billion to aid to states. Do not lay off teachers to subsidize home purchases. Do not lay of police to give tax relief to the top 10% of taxpayers. Do not lay off human services workers to help pay for car purchases. Stop the give aways. Stabilize basic services first. Shame on those who voted for it. Firm up your spine. Fight for a final bill that works!
Feb 10, '09
One in every ten jobs is tied to the auto industry. An above-the-line Deduction for Automobile Purchases is designed to boost sales, maintain jobs in the auto industry, and possibly will help maintain jobs at the Port of Portland through which more cars and light trucks are imported than through any other port on the West Coast. It is the anti-auto mindset, increased and excessive spending on transit and bicycle alternatives where the infrastructure costs are not paid for by the users, and increased operational taxpayer subsidies for transit that are the types of behavior that have led to the current economic downturn.
4:57 p.m.
Feb 10, '09
"YOU DON'T DESERVE THAT MUCH MONEY!!! "
Who said anything about not deserving? We're talking about whether 152K is anything but "rich" in Oregon, and whether those households pay their fair share for being blessed with the conditions to allow them to make that money.
5:02 p.m.
Feb 10, '09
@ Terry, Let me get this straight. You think it is OK to subsidize the purchase of imported car (cars made in Japan, for example) while laying off human service workers in Oregon.
And you count the $30 billion in funding for highway roads and bridges in the stimulus bill as some kind of infrastructure costs paid for by user fees? And we should do these infrastructure projects while laying off teachers in Oregon?
Feb 10, '09
I don't think the tax credit won't encourage much new activity but it will be like going to the store where the item you planned on purchasing was already on sale. A benefit but not much of a stimulus.
Feb 10, '09
The assumption when someone posts is that they are speaking from the gut. If there is a vested interest, we mention it out of courtesy to the others reading. This last bit of Parker puke really had the ring of someone micromanaging message, rather than legit citizen concern. What a surprise. Marketing and a teen-age decision that cars were cool taken into adult life. I'll say this for Portland. The bottom feeders come up for air! Man, that was some election cycle. You could catch Carshlock and Parkher on the same day! And what's with the literally not showing your face bit?
Metro Council, District #5
No Photo Submitted - TERRY PARKER
OCCUPATION: None
OCCUPATIONAL BACKGROUND: Customer service and advertising.
EDUCATIONAL BACKGROUND: Graduated Madison High School, Portland, Oregon. Automotive technician classes – Portland Community College, Portland, Oregon.
PRIOR GOVERNMENTAL EXPERIENCE: Served four years as a member including two years as chair of the Banfield Citizen Advisory Committee that recommended the region’s first light rail line from Downtown Portland to Gresham, and widening I-84 from I-5 to Gateway.
Land Use: Growth must be financially sustainable instead of taxpayer subsidized. Tax abatement programs on all but low-income property should be discontinued with luxury properties paying the full amount. The school portion of taxes on increased property values in urban renewal districts should be paid to the schools. Individual neighborhoods must have the option of retaining their own character without over densification. More permeable areas are needed instead of building structures sidewalk to sidewalk.
Transportation: The region is wasting a lot of transportation dollars on what is called “street modernization”. One of the basic components of these street makeovers is adding curb extensions causing busses to stop in travel lanes, blocking traffic and creating congestion which then increases fuel consumption for motorists and negatively impacts air quality. Attacking the automobile with taxes for subsidies to support for other modes only reduces Oregon’s large non-subsidized auto industry job base and increases the region’s cost of living. Alternative modes must be financially self-sustaining. Sharing the road means sharing the financial responsibility, an issue the current leadership has failed to discuss with the public. Bicyclists need to be taxed for their use of exclusive right-of-ways while expanded transit options must be in part funded from dedicated surcharges on user transit fares, possibly a nickel or dime a ride. No take-a-ways such as removing motor vehicle lanes should take place when an alternative option is added. Motorists as the current funding stakeholders for transportation systems must have direct representation on all transportation related citizen committees. Reality checks must precede all decisions.
Now, which is more narcissistic? Being inspired to run by the minor irritation of having to wait 20 seconds for a bus to pull over, or not being ashamed to say so publicly?
Feb 10, '09
You can catch their act every day at Portland Transport Blog, where they appear as the Amazing Bandwidth Eaters!
7:54 p.m.
Feb 10, '09
I could have predicted the response you are gonna get. You are TOO wealthy. You should be taxed at an astronomical rate. YOU DON'T DESERVE THAT MUCH MONEY!!! You are evil.
From where I sit, whether taxes should be higher or lower for the affluent is a massive red herring. The point of this exercise is to stimulate the economy, not to rehash tax policy. I don't give a flying fuck whether Steve or anyone else deserves to keep more money or not. That has nothing whatever to do with the economic CRISIS facing us.
Feb 10, '09
You can catch their act every day at Portland Transport Blog, where they appear as the Amazing Bandwidth Eaters!
8:06 p.m.
Feb 10, '09
The irony here is that both sides now seem to be quibbling over the best way to reduce the size of the stimulus when it is more likely that the stimulus is too small. I'd be happy to leave in all the tax cuts if they would just add back the spending that was cut on the Senate side, too.
My prediction is that after the stimulus is finally passed, we will be back with more stimulus before the year is out. As of the fourth quarter of last year, the economy was already running nearly $500 billion below capacity. We could easily be $1 trillion behind by the second quarter of this year and still falling.
Feb 10, '09
"could inflate housing prices."
Oh my god! Why would they want to include something like this?
I am not the $152K/yr Steve. So TorridJoe you can stop wasting more taxpayer time with your vitriol. Isn't there anything you could be doing at your city job besides blogging away? Makes me fel god to be payingmy taxes.
Feb 10, '09
Chuck says: Putting it in the stimulus bill allows this provision to be enacted without being paid for, adding $70 billion to the cost of the legislation and increasing the deficit unnecessarily.
Since when is 'being paid for' a litmus test for whether anything is in or out of this god-forsaken $800B piece of spending legislation that will enslave our children for generations to come?
Chuck also says: This tax break would not help recipients who have no federal tax liability (the lower-income and long-term unemployed people). And the higher the tax bracket, the bigger the benefit. What a break for the executive that earned $200,000 or more this year before losing his job!
So any tax benefits should now only be targeted to people who have no federal tax liability? Sure, that makes sense... What about all those hundreds of thousands of newly unemployed people that made less than your magic $200,000 line that DO pay taxes? Guess they're SOL in your world. What is it with how some of you people think? I swear you'd prefer all 10 people starved to death in a room full of food rather than see one person get a little more than the rest (even if he/she earned it) Geez...
Feb 11, '09
I am sure glad there's $300Million for Green golf carts in the stimulus package. You Dems must be proud of your accomplishments!
http://www.nypost.com/seven/02112009/news/politics/congress_hopping_carts_154496.htm
Feb 11, '09
Instead of green golf carts, that money would be better spent on MUNITIONS. I don't care for whom or for what purposes. MUNITIONS. Now that's a stimulus I can believe in.
Feb 11, '09
Unemployment benefits like disability payments and death insurance benefits over 50K shouldn't be taxed.
All these items weren't taxed until 1986 when the wage earners had increased taxes and decreased benefits under the Reagan/Bush I era.
If more money is needed, they should roll back investment and dividend tax credits and cuts.
I think it's shameful for the government to rely on money from the unemployed, the disabled, and the widowed. They have enough problems.
10:54 a.m.
Feb 11, '09
TJ, sorry but I think you need to do a bit of homework on the AMT.
The AMT was never intended as a way to make sure that very wealthy taxpayers--those who in the late 1960s earned more than $200,000 and paid NO income taxes via the use of tax shelters--would pay some "minimum" tax.
In the 1986 tax reform package, in order to reach revenue neutrality, the AMT failed to be indexed. This meant that as incomes rose alone with inflation, more and more citizens fell under the AMT.
These are not taxpayers who do not pay their "fair share." These are taxpayers who are more than willing to fill out the regular 1040 and pay their share of taxes. But once you fall into the AMT, the whole system of regular deductions falls apart.
Both the CBO and the OMB project that, without modification, that 25% of taxpayers will fall under the AMT by 2010.
10:54 a.m.
Feb 11, '09
Sorry, delete "never" in the second paragraph above.
Feb 11, '09
Dave Porter asked: “You think it is OK to subsidize the purchase of imported car (cars made in Japan, for example) while laying off human service workers in Oregon?”
First off, I think people should when possible buy American made and American brand products. However, the “above-the line” deduction as I understand it is for the interest paid on an automobile loan, not a subsidy directed at the purchase. Gov K is the person that wants to give a tax credit for the purchase for cars made in China, not me. As for the Department of Human Services, like most government agencies it is undoubtedly bloated in some areas. Some streamlining could probably take place without lying off people.
In response to Abby’s comments;
“narcissistic?” I don’t think so. Again that is Gov K and his agenda to control everything from dam removal to how people heat their homes to how people move about the state – the exception being himself with his big state supplied town car and using legislators’ private planes to go to areas of the state that are off limits to the rest of the public.
I did in fact run for Metro Council throwing my name in the hat at the very last day so Rex would have some competition. I spent approximately $1100. on the campaign and for that received approximately 16 percent of the vote as a relatively unknown – that compared to the $30,000. or so Rex had to spend while already having name familiarity. None the less a lot of people agreed with me.
Like Gov K, Abby is also being hypocritical. She would rather have the government spend tax dollars to create more congestion on our roadways than spend motorist paid tax dollars to streamline our road system and make it more free flowing. Idling engines in traffic increases fuel consumption for motorists and negatively impacts air quality. Apparently she also agrees with Metro wastefully spending and squandering away $4.5 million in transportation dollars to fund a social engineering program, the “Drive Less-Save More” campaign, rather than spend the those same dollars to build something constructive that would not only in actuality help relieve roadway congestion and assist motorists move through traffic better, but also create jobs. Obviously Abby comes from a generation that expects the government to take care of her like mommy and daddy did when she was attempting to grow up, and now she is just sitting on her butt, advocating to legalize and smoking weed.
Feb 11, '09
Stimulus my ass. The very thought of government deficit spending actually helping out our economy is pure BS. Even a trillion dollars is a pimple on the ass of our economy. Just like the 30's, this spending will PROLONG our problems. Funny how the Patriot Act was passed much too fast, and this stimulus bill could not be passed fast enough. Transparency? Ethics? Obama is clearly in way over his head, and worst of all doesnt know it. The problem is CONFIDENCE. This bill will actually hurt reasonable people's confidence that things will improve in the short term. Let the shit fall, and we will pick up the pieces and move one. Obama, don't mess with the free market, you don't understand, unless your aim is to sweep entire market sectors forever under govt control.... The government IS NOT something that is here to help us and there is now NO limitations on it's power. All the 250+ founding fathers are turning in their graves, as we have not been successful minding our republic. Once you vote yourselves largess from the public trough..... But hey, if I worked for the state I wouldn't even know there is a problem, my union would call TED to make sure my raise is still coming, and my 401k is making 8%, and we have never had a layoff. WHAT A COUNTRY!!!
Feb 11, '09
Zara said, "He extended a hand to the other side and suffered a vicious mauling. He may lose the hand."
More like he extended a hand to his fellow corporatists and they got what they wanted. Anybody who's surprised about the non-stimulus hasn't been paying attention.
Close the imperial military bases, and slash the bloated military-security budget. Pay for real stimulus with those savings plus the money from a securities speculation tax.
Hegemony or survival. You choose.
3:55 p.m.
Feb 11, '09
"TJ, sorry but I think you need to do a bit of homework on the AMT.
The AMT was never intended as a way to make sure that very wealthy taxpayers--those who in the late 1960s earned more than $200,000 and paid NO income taxes via the use of tax shelters--would pay some "minimum" tax."
The AMT has changed numerous times since 1969. I agree that its original design was to prevent zero tax from being paid in some cases, but in the intervening years the "regular" tax burden of upper income payers has dropped dramatically--by about half for the top tier just on wage income (from 77% to I believe 35%), and further through reductions in capital gains, dividend and estate taxation.
One correction: I believe CBO's estimate is 20%, not 25%.
In any case, that wasn't really my point anyway. It was that saying your household takes in 152K and implying that is somehow part of Oregon's "middle class" is absurd.
3:58 p.m.
Feb 11, '09
"Stimulus my ass. The very thought of government deficit spending actually helping out our economy is pure BS. Even a trillion dollars is a pimple on the ass of our economy. Just like the 30's, this spending will PROLONG our problems."
Ha! Yeah, just like the 30's--when, four years after FDR's plans were implemented, GDP reached record levels...and growth slowed only when he relented and did what the same know-nothing Republicans pushed him to do: stop spending and cut taxes.
This one is too easy--it's already been forcefully rejected many times since it's stupidly come up in this debate. All you need to do is look at the GDP chart for the period to put a lie to the nonsense.
Feb 11, '09
"In any case, that wasn't really my point anyway. It was that saying your household takes in 152K and implying that is somehow part of Oregon's "middle class" is absurd."
Uh, Mr Joe, maybe you shoudl spend more time working and less knee jrek reaction to blogs. If you can't tell by the tone of the other Steve's email, he's jerking your chain.
Keep going, the taxpayers appreciate you taking their time to blog. IF you can remove your ego nd realizer most successful blogs have more comments than posts you might want to re-examine your LoadedOrygun blog.
10:06 p.m.
Feb 11, '09
"Keep going, the taxpayers appreciate you taking their time to blog."
Wow, wasn't aware you had access to my schedule. You don't have the first clue about what I'm doing. You're simply glomming onto Jack Bog's weak bullying as the same ad hominem way of avoiding the issue. The comments about the blog-equally weak and distractive. Weeping for those who pull in 150K and aren't getting their expected stimulus goodies, that's the issue. It's a poor way to start the economy, that's the issue. Care to read the article again?
Feb 12, '09
Why do we need this stimulus bill? Can't we just build more bombs? Can't we just build more munitions factories? That would put more people to work! And you know, the world needs more bombs! And mines, and grenades, and machine guns! And tanks, gotta have more tanks! And big freakin' bombers to drop all the bombs! And while we're at it, reinstate the draft so more people can have jobs using the munitions we are making! Viva la revolution!
Feb 12, '09
"You don't have the first clue about what I'm doing."
OK, I’ll bite. You’re right, I don’t know what you do at work. I only see about a dozen entires on BLueOregon daily during 8-5 Mon-Fri work hours. Then almost every post on LoadedOrygun is during the same frame (considering you get 0 comments on most entries maybe work distracts you from making good posts.)
The main reasons this bugs me are: 1) CoP rules state personal use is for professional business use in the performance of one’s job. (Section 4.08 – Acceptable uses of information technologies. I am not seeing how blog posts constitutes business use especially when they start taking a measurable part of the day. 2) In reference to the above 4.08, Prohibited uses include Use of city information technologies for political activity or in a manner that would directly or indirectly assist a campaign for election of any person to any office, or for the promotion of or opposition to any ballot proposition. Most of your comments are espousing your political views. 3) Using four-letter words for effect really adds nothing intelligent to any dialog and comes off sounding like an angry teenager. 4) A lot of Portland residents pay property taxes and expect potholes to be filled and police coverage. However, when you steal from taxpayer monies by blogging, his implies your position is redundant and the monies could be better spent elsewhere. 5) Your pay as analyst is probably above what the average wage earner in Oregon makes ($40K) which makes the working men and women who pay your salary even more demeaned.
Again, if you parse the other Steve's comments, he is jerking your chain. You have no idea what those who make 150K pay in taxes. However, it is probably a pretty good chunk of your salary as a CoP employee.
Feb 12, '09
Posted by: Harry Kershner | Feb 11, 2009 12:50:48 PM
Zara said, "He extended a hand to the other side and suffered a vicious mauling. He may lose the hand."
More like he extended a hand to his fellow corporatists and they got what they wanted.
I stand corrected.
Feb 14, '09
I could go on and on about the faults of the so called stimulus package, but I just want to make one point. Progressives too often focus on screwing the wealthy, which they may deserve, and fail to recognize the effects on the middle class. Removing taxation on unemployment benefits would help me and others greatly. Putting an appropriate cap on non-taxable benefits is simple and effective. This is true for many other situations where benefits need to be targeted to those who need it and away from those who don't.
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