Obama’s Economic Recovery Plan Is Almost As Pure As Ivory Soap
By Bernie Horn
January 27, 2009 - 10:00pm ET
There’s been a lot of bitching and moaning in the progressive blogosphere about the huge business tax cuts that are supposed to be contained in President Obama’s economic recovery plan.
In fairness to all, the negotiations took place behind closed doors, leaving us little solid information on which to base opinions. And over the years, we’ve had good reason to be wary of backroom deals in Congress.
But there's good news. The American Recovery and Reinvestment Act is a remarkably “clean” bill. Only between 1½ and 3 percent is being wasted on tax cuts for business. Put another way, the bill is about 98 percent pure—money dedicated to good, progressive causes.
The Congressional Budget Office (CBO) analysis, released Monday, says the business tax cuts will cause “a net revenue loss of $13 billion over the 2009-2019 period.” See the discussion on pages 11-12 of this document.
The figure of $13 billion is confirmed and explained by the House Ways and Means Committee on pages 2-3 in this document. There are only three business tax provisions that have a significant price tag. First, the extension of bonus depreciation enacted last year, allowing businesses to depreciate capital costs faster than the ordinary schedule, will cost $5 billion. Second, the 5-year carryback provision, allowing businesses to deduct net losses from the last five years instead of the last two, will cost $15 billion. Third, the repeal of a Bush Treasury Department ruling that unjustly benefits the purchasers of certain companies will increase revenues by $7 billion. So $20 billion in business tax cuts are offset by a $7 billion tax increase, leaving a total of $13 billion in benefits.
As you probably know, the Senate Finance Committee intends to make larger business tax cuts than the House bill has. The analysis of the Finance Committee’s markup, evaluated by the Congressional Joint Committee on Taxation, is on page 3 of this document. The Senate version includes both the bonus depreciation and 5-year carryback provisions, but the Joint Committee estimates these will cost a total of $22.5 billion instead of the House’s $20 billion. The Senate does not include the $7 billion tax increase and adds a bit more than $2 billion more in tax breaks for a total of $24.9 billion in business tax benefits.
The CBO tells us that the whole bill costs $816 billion. So if the Senate version is adopted, only 3 percent of the spending is for business tax breaks. (That percentage is about the same with or without the recent Alternative Minimum Tax provision.) If the House version is adopted, it’s only 1½ percent. Either way, this is a bill that is between 97 and 98.5 percent targeted toward good causes.
In our nation’s capital, no major bill ever passes without a “sweetener” for the special interests you may oppose. By Capitol Hill standards, this is an exceptionally modest sweetener. And don’t think it’s necessarily being done to gain Republican votes—key Democrats want these too.
The bottom line: This is the biggest and boldest progressive legislation in 40 years. By all means, register your complaints against the business tax cuts. But don’t let that dampen your enthusiasm for the overall measure. If you live in a state with a Republican or less-than-liberal Democratic Senator, call them today and urge them to support this bill. You'll be sorry if you don't help out, because this is history in the making.
The writer is a Senior Fellow at Campaign for America’s Future and author of the recent book, Framing the Future: How Progressive Values Can Win Elections and Influence People.
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Views expressed on this page are those of the authors and not necessarily those of Campaign for America's Future or Institute for America's Future