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There’s been a lot of bitching and moaning in the progressive blogosphere about the huge business tax cuts that are supposed to be contained in President Obama’s economic recovery plan.

In fairness to all, the negotiations took place behind closed doors, leaving us little solid information on which to base opinions.  And over the years, we’ve had good reason to be wary of backroom deals in Congress.

But there's good news.  The American Recovery and Reinvestment Act is a remarkably "clean" bill. Only between 1½ and 3 percent is being wasted on tax cuts for business.  Put another way, the bill is about 98 percent pure—money dedicated to good, progressive causes.

The Congressional Budget Office (CBO) analysis, released Monday, says the business tax cuts will cause "a net revenue loss of $13 billion over the 2009-2019 period."  See the discussion on pages 11-12 of this document.

The figure of $13 billion is confirmed and explained by the House Ways and Means Committee on pages 2-3 in this document.  There are only three business tax provisions that have a significant price tag.  First, the extension of bonus depreciation enacted last year, allowing businesses to depreciate capital costs faster than the ordinary schedule, will cost $5 billion.  Second, the 5-year carryback provision, allowing businesses to deduct net losses from the last five years instead of the last two, will cost $15 billion.  Third, the repeal of a Bush Treasury Department ruling that unjustly benefits the purchasers of certain companies will increase revenues by $7 billion.  So $20 billion in business tax cuts are offset by a $7 billion tax increase, leaving a total of $13 billion in benefits.

As you probably know, the Senate Finance Committee intends to make larger business tax cuts than the House bill has.  The analysis of the Finance Committee’s markup, evaluated by the Congressional Joint Committee on Taxation, is on page 3 of this document.  The Senate version includes both the bonus depreciation and 5-year carryback provisions, but the Joint Committee estimates these will cost a total of $22.5 billion instead of the House’s $20 billion.  The Senate does not include the $7 billion tax increase and adds a bit more than $2 billion more in tax breaks for a total of $24.9 billion in business tax benefits.

The CBO tells us that the whole bill costs $816 billion.  So if the Senate version is adopted, only 3 percent of the spending is for business tax breaks.  (That percentage is about the same with or without the recent Alternative Minimum Tax provision.)  If the House version is adopted, it’s only 1½ percent.  Either way, this is a bill that is between 97 and 98.5 percent targeted toward good causes.

In our nation’s capital, no major bill ever passes without a "sweetener" for the special interests you may oppose.  By Capitol Hill standards, this is an exceptionally modest sweetener.  And don’t think it’s necessarily being done to gain Republican votes—key Democrats want these too.

The bottom line:  This is the biggest and boldest progressive legislation in 40 years. By all means, register your complaints against the business tax cuts.  But don’t let that dampen your enthusiasm for the overall measure.  If you live in a state with a Republican or less-than-liberal Democratic Senator, call them today and urge them to support this bill.  You'll be sorry if you don't help out, because this is history in the making.

The writer is a Senior Fellow at Campaign for America’s Future and author of the recent book, Framing the Future: How Progressive Values Can Win Elections and Influence People.

Originally posted to Bernie Horn on Wed Jan 28, 2009 at 06:51 AM PST.

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Comment Preferences

  •  Good news, good title. (1+ / 0-)
    Recommended by:

    13 Billion Dollars is slightly more than one Iraq/Month, my suggested measure for money, equalling the out of pocket for a single month of the war.  It seems that any stimulus package of less than 100 Iraq/Months will be insufficient stimulus according to Krugman.

    "The first Republican who cries "Wolverines!" on the House or Senate floor has to be considered the front-runner for the 2012 Iowa caucus." JF on TPM

    by Inland on Wed Jan 28, 2009 at 06:56:26 AM PST

  •  Not a doubt in my mind that the bill passes (1+ / 0-)
    Recommended by:

    Whether or not it's nearly enough is another matter entirely.

    Two things are worse than being fearful. Fearing being fearfull. And fearing the fear of being fearfull. Three maybe - Fearing....

    by SecondComing on Wed Jan 28, 2009 at 06:56:51 AM PST

  •  But, will it help jolt the economy forward? (1+ / 0-)
    Recommended by:

    I am not sure. This along with the 'Bad' bank and others like helping home owners avoiding foreclosures should help.
    Only time will tell the effectiveness of this bill.

  •  Nice Analysis (0+ / 0-)

    Thank you for delving into the tax cut issue.  Your facts are reassuring.  

    I do have a question, though.  I have heard several times that the tax cuts were in the $250B range.  Any idea where that number came from and why it is being reported, even by the likes of Rachel Maddow?

  •  "wasted on tax cuts for business" (0+ / 0-)

    Depending on which business and what the cuts are, I don't think it's necessary to call it a waste. Cutting taxes on small businesses saves jobs.

    (-8.00, -7.18) Daily Kos Saturday Film Club movie this week: To Kill a Mockingbird

    by Arken on Wed Jan 28, 2009 at 07:27:35 AM PST

    •  ???? (1+ / 0-)
      Recommended by:

      Cutting taxes on small businesses saves jobs.

      I have never seen any evidence that this GOP talking point has any merit.

      Please connect A to B, i.e., how does reducing income taxes on small business profits, while holding turnover constant, result in hiring/less firing, especially since wages and benefits are deductable (i.e., pre-tax) business expenses?

      You want to save or create jobs?  Provide small businesses with more paying customers.

  •  The real question still remains (0+ / 0-)

    Will Obama's stimulus plan actually work?  Only time will tell I guess.  The idea is that by the middle of 2010 through the end of 2010 Obama's plan will have created the jobs and GDP will be growing again.  For Obama's sake, I hope his plan succeeds.  It would be horrible if this proves to be the biggest and largest waste of tax payer money in our history.

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