The views expressed by contributors are their own and not the view of The Hill

House GOP starts costly effort to save cuts for wealthy in Trump tax law

Getty Images

House Republicans recently brought the nation to the brink of financial ruin because of a professed concern over federal debt. Yet this week they’ve pursued legislation that contains wasteful tax giveaways that would cost hundreds of billions of dollars if made permanent. Why the change? Turns out Republicans don’t mind spending as long as it’s for the right cause — which apparently for them is giving tax cuts to large corporations and their wealthy owners. 

The House Ways and Means Committee this week progressed a bill to revive several expired corporate tax breaks in the 2017 Trump-GOP tax law. That law — which mostly benefited the rich — made certain components temporary to lower the cost of the package to fit congressional budget rules. These provisions were meant to partially pay for other handouts in the law, most prominently a 40 percent cut in the corporate tax rate. Now House Republicans want to keep the rate cut and reopen the loopholes as well. 

The three corporate provisions at the center of the current legislation all concern how much corporations are allowed to deduct from their profits before figuring their taxes. The more corporations can deduct, the lower their taxable income, the less they owe. 

First, the Ways and Means bill would allow corporations to write off the cost of big assets much faster than they actually wear out. Under normal accounting rules, companies can only deduct in the year of purchase the cost of items that get used up right away — like electricity and workers’ wages — or nearly so, like office supplies. But the cost of more substantial assets — like machinery and vehicles — needs to be deducted in pieces over time to reflect their slow decline in value in a process called “depreciation.”

The Republican tax law overrode the sensible principle of depreciation by letting firms deduct immediately the cost of items expected to last up to 20 years, allowing highly profitable corporations to slash their tax bills. This loophole gave Verizon more than $5 billion from the federal treasury over the first four years the new rules were in effect, while Google got $5 billion and Facebook (Meta) got almost $4 billion. But the 2017 Trump-GOP tax bill began a gradual phaseout this year of “bonus depreciation” and now House Republicans want to keep it at full strength. 

Second, the Ways and Means package would restore a big write-off for corporate research. Research costs traditionally have been deductible in the year incurred, but to help pay for the tax law’s huge cut in the corporate tax rate and other handouts, corporations as of last year have had to depreciate those costs over five years — not an unreasonable approach to valuing research results that can pay off over a long time. 

Third, the Ways and Means bill would allow corporations to deduct more of their interest payments. In another tradeoff for the 2017 law’s corporate-tax largesse, Republicans limited the corporate-interest deduction to 30 percent of a common measurement of profits—resulting in a smaller interest deduction and thus higher taxes. House Republicans want to allow a broader definition of income to allow corporations to deduct more interest and thus lower their taxes.

Altogether, reviving these corporate tax breaks would cost around $600 billion in lost revenue over 10 years. That’s as much as President Biden this year proposed spending to provide free pre-K for all four-year-olds and affordable daycare for 16 million kids, displaying different priorities. And while the Ways and Means bill would give more tax cuts to corporations and the wealthy, it would do very little or nothing to help the 19 million children who currently don’t get the maximum Child Tax Credit.

American corporations don’t need more tax breaks. The effective tax rate for profitable corporations has already fallen from 16 percent under President Obama to just 9 percent in the year after the Trump tax law was passed. Corporate profits are at record highs and corporate taxes as a share of federal revenue are less than half what they were 50 years ago. And when corporate taxes are cut, it’s the rich who benefit because they’re the ones who own corporations: the wealthiest 1 percent own over half of all corporate stock, and the top 10 percent own almost 90 percent.

With Democrats controlling the Senate and President Biden in the White House, the House GOP’s initial foray into resurrecting expiring Trump tax cuts will fail. But at the end of 2025, most of the law’s individual-tax provisions — which heavily favor the wealthy — are scheduled to sunset. The GOP wants to keep them all. 

This week’s bill is a test run to see how successful those long-range efforts will be. That’s why it’s important to pay attention to the current legislation and start building opposition to the inevitable, high-powered campaign coming soon to make all the expiring provisions permanent. 

If this larger Republican strategy is successful it would add $3.5 trillion to the national debt over 10 years, wiping out the $1.5 trillion reduction in debt achieved through spending cuts in the debt-ceiling deal and adding another $2 trillion on top. 

So congressional Republicans will either add to our nation’s debt or propose more budget cuts to domestic spending — even perhaps to Social Security and Medicare. Either way, they’ll uphold their highest priority: cutting taxes for the wealthy and corporations. 

David Kass is executive director of Americans for Tax Fairness.

Tags Federal Debt Joe Biden tax cuts

Copyright 2023 Nexstar Media Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Most Popular

Load more