Budget band-aids
by digby
Yes, they’re asking for some loopholes to be closed, but the Democrats are still defending the cutting:
The U.S. tax code clearly benefits the wealthy and well-connected. It would be unfair, and unacceptable, to ignore every last loophole and special interest carve-out yet ask seniors and families to bear the burden of deficit reduction alone.
At our first conference meeting, House Budget Committee Chairman Paul Ryan (R-Wis.) said, “If this conference becomes an argument about taxes, we’re not going to get anywhere.” I absolutely agree. A budget conference is not the place to debate comprehensive tax reform. Senate Finance Committee Chairman Max Baucus (D-Mont.) and House Ways and Means Committee Chairman Dave Camp (R-Mich.) have been working hard with their committees on reform plans, and we will have time to debate this critical issue as their work progresses.
But closing a few wasteful loopholes now would not threaten the much larger debate over simplifying the 75,000-page tax code. In fact, doing so would underscore how much more work remains. Anything we do to get a fair deal in this budget conference would be a drop in the ocean compared with an estimated $14 trillion in forgone revenue from tax expenditures over the next 10 years.
Consider two examples of wasteful loopholes that could be ended immediately without risking overall tax reform.
Right now, big corporations can skirt the limits on deductible executive compensation and claim massive tax breaks by paying their CEOs in stock options and bonuses instead of paychecks. Not only is this unfair but it also encourages the sort of reckless, short-term focus on profits that contributed to the financial crisis. Closing this loophole would save as much as $50 billion over 10 years.
Another loophole, known as “check the box,” allows major multinational corporations to hide foreign subsidiaries and profits from the Internal Revenue Service simply by marking a box on their tax forms. The ability to easily create these “disregarded entities” was intended to help U.S. companies reduce their tax filing paperwork. But big U.S. companies put their foreign subsidiaries in this category as part of their efforts to shuttle profits to tax havens such as Bermuda. Closing this loophole would save as much as $80 billion over 10 years.
If we eliminated these two loopholes — totaling less than 1 percent of all federal tax expenditures — and paired that with an equal amount of responsible spending cuts, we could replace more than two full years of sequestration’s cuts to education, research, infrastructure, jobs and the military.
That’s Patty Murray in an op-ed staking out the Democratic ask in this budget negotiation. You’ll notice that the whole thing is still centered around deficit reduction — those budget caps are on tight and the best these democrats are hoping for is a two year respite. The only question at the moment is whether we’ll close a couple of loopholes with an equal amount of cutting or whether we’ll just rearrange the deck chairs on the Titanic instead. There has been no revisiting of the basic premise of deficit reduction in a weak economy and there’s little reason to hope that will happen.
Obviously, having some millionaires and corporations kick in some spare change would be nice if only for a (purely symbolic) nod toward fairness. But I think we all know that in these days of politics awash in Big Money, the minute one “loophole” is closed, another one will be opened. It is highly, highly unlikely that this amount of money from “loopholes” will ever fully materialize. K Street will see to that.
It’s long past time for Democrats to challenge the central premise of all the budget battles of the past few years. Otherwise our future is going to be very grim. What they are doing is, as Krugman pointed out on Friday, economic self-mutilation. Putting a little band-aid on it in the form of “loophole closing” isn’t going to stop the bleeding.
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