Fiscal Cliff, January 2013

The “fiscal cliff” legislation passed this week included $76 billion in special-interest tax credits for the likes of General Electric, Hollywood and even Captain Morgan rum, but these subsidies weren’t the fruit of eleventh-hour lobbying conducted on the cliff’s edge, they were crafted back in August in a Senate committee, and they sat dormant until the White House reportedly insisted on them this week. GE and Citigroup, for instance, hired Breaux and Lott to extend a tax provision that allows multinational corporations to defer U.S. taxes by moving profits into offshore financial subsidiaries. The provision known as the “active financing exception” is the main tool GE uses to avoid nearly all U.S. corporate income tax. Think about this: just the business and energy tax extenders reduce federal revenue by $67.7 billion in 2013. The tax hikes on the rich Obama won — higher rates on those over $400,000 and reduced deductions on those over $250,000 — raise $620 billion over a decade. As far as I know, we can safely guess that this would be less than $62 billion in 2013. Unless I’m missing something, the special-interest tax breaks Obama demanded look to be bigger than the money he raised by taxing the rich. If he had just let all these special tax breaks expire like wind tax credits, algae subsidies, and railroad track maintenance, it would have raised more revenue than his tax hikes on rich individuals and small businesses. This wasn’t about fairness, it was about unfairness. It was about writing that unfairness into law. It was about one hand washing the other and corruption corrupting the system further. It was about Obama being Obama and big government being big government.