While Republicans were fighting to keep Bush-era tax cuts from going over the fiscal cliff, parachuting safely to passage were a number of tax breaks for a variety of industries.
Included in the recent $75.3 billion budget deal passed by Congress and signed by President Barack Obama were tax softeners for interests as diverse as wind farms, motorsport tracks, global banks and Puerto Rican rum.
Democrats were resisting special-interest business provisions while Republicans were demanding spending cuts. Some spending cuts made it into the bill, passing both parties, though complaints about the special endowments earned complaints from both sides of the aisle.
Most of the tax breaks had expired by the end of 2011 and will be extended through 2013, according to Bloomberg Businessweek
One analyst told Businessweek the breaks are basically “economically useless or harmful” but they served a broader purpose in the culture of politics and lobbying in Washington — fundraising.
“If you make them permanent, you get the campaign contribution once,” said Bob McIntyre, director of Citizens for Tax Justice. “You do it every year or two, they have to ante up again and again.”
Because the tax breaks must be renewed every so often, companies say they can’t count on their reliability to plan investment strategies around them.
All of the breaks are lumped together in the budget package meant to reduce the federal deficit, which has loomed above $1 trillion for four years. Included in the breaks are things as broad as multibillion-dollar benefits for big companies to much smaller changes framed to increase employment among Native Americans. Elsewhere, there is a credit provision for corporate research, one that costs the government $14.3 billion in revenue.
There’s also a $11.2 billion two-year extension of the active financing exception, which allows multi-national corporations to defer taxes on financing they earn outside of the U.S.
“You can see where Congress’s heart is, perhaps its soul as well,” McIntyre said.
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