There is nothing fundamentally wrong with businesses receiving incentives to do the research and development that will lead to the products and services – and jobs – of the future. But the House is about to get it all wrong in today’s vote for a research and experimentation tax credit bill. That’s why the Campaign for America’s Future has joined Americans for Tax Fairness in calling for a “no” vote on that bill.
Context matters, particularly with regard to this bill. The tax credit bill is one of six “tax extender” bills recently approved by the House Ways and Means Committee. They should really be called “tax-break extender” bills since what they actually do is renew a set of tax breaks that expired at the end of 2013.
That’s the same time federally funded emergency benefits for people who have been unemployed for more than 26 weeks were allowed to expire. There are 3.4 million people officially counted as having been looking for work without success for at least that long, and we are in the fifth month of these people losing the benefits they need to pay their basic living expenses – including the costs associated with searching for a job.
But the House has refused to take up a Senate bill that would renew these benefits, with House Speaker John Boehner leading the Republican argument that those benefits should not be renewed unless they are “paid for” – their $10 billion cost offset by cuts elsewhere in the federal budget.
But that pay-for argument is nowhere to be found in the debate about the research credits, which would cost the government $156 billion in uncollected revenue over the next 10 years, or five other tax extenders that the House is about to consider, which together would award another $154 billion in tax breaks to businesses over 10 years. Hence the fundamental question: How is it that we can afford to give businesses $310 billion in tax breaks, but we can’t afford to give unemployed people $10 billion to help them pay for food and housing while they look for a job in a weak economy?
The reality is we can’t afford these tax breaks as the House has presented them. The Obama administration said as much in a strongly worded letter to the House late Tuesday urging a vote against the research tax credit and other upcoming extenders. The research tax credit alone, the letter notes, “is more than 15 times the cost of the proposed extension of emergency unemployment benefits” that the House Republicans said was unaffordable. And if Congress enacted all of the outstanding “tax extenders” waiting in the wings, that “would add $500 billion or more to deficits, wiping out most of the deficit reduction achieved through the American Taxpayer Relief Act of 2013.”
There’s an even better argument against the bill that’s consistent with the view that it is foolhardy to be primarily focused on deficit reduction in a slack economy: that this revenue is better spent on projects that will actually create jobs and support business productivity in the long run. For example, the federal fund that supports transportation projects is about to run out of money by this summer. Instead of awarding businesses $150 billion in tax breaks, that money could instead cover the shortfall in the highway and public transportation trust funds through 2023.
There is, of course, the nefarious nature of some of these tax breaks. On tap for future votes in the House are tax breaks that allow big corporations like General Electric, Wall Street financial institutions and Silicon Valley giants to rack up billions in profits without paying any taxes. Both the “active financing exception” and the “controlled foreign corporation look-through rule” provide ways for corporations to avoid taxes by shunting profits made in the U.S. overseas. These two tax provisions alone cost the government $79 billion.
An added insult is that the Ways and Means Committee has yet to act on two tax breaks desperately needed by working families. They are the Earned Income Tax Credit and the Child Tax Credit, and both will expire in 2017 unless Congress acts. If those tax breaks aren’t extended, at least 12 million families would fall below the poverty line, according to the Center for Budget and Policy Priorities.
What Congress should do is table these so-called “extenders” and instead work on real tax reform, based on common-sense principles that have the support of the populist majority: restore true progressivity to the tax code so that corporations and the wealthy pay their fair share, end tax breaks that reward corporations for shipping jobs and profits overseas, and focus tax incentives on actual domestic job creation and investments that will hasten an economically equitable and environmentally sustainable future economy.
You can send a letter to your member of Congress today asking that member to vote no today on the first of these tax extenders. Tell Congress to instead prioritize aiding the long-term unemployed, protecting low-wage families who need the earned Income Tax Credit and the Child Tax Credit, and close the loopholes that make our tax code unfair and deprive us of the ability to invest in what we need to strengthen our economy.