It's no surprise to people in the reality-based world--you know, the people who look at facts--that most corporate tax cuts are not going to create jobs. All that bleating from the bi-partisan chorus that fawns over the "job creators" (read; overpaid corporate executives) and never met a corporate tax break it didn't like (especially tax breaks that oil up those campaign contributions...looking at you, Steny Hoyer) ignores the reality that the promised jobs, in return for tax cuts, just don't materialize--not to mention jobs thatpay a decent wage.
But, it's worth noting that, sometimes, even the business press has to throw out a factual article about taxes. And this one is pretty good and eviscerates the "bonus depreciation" huge tax give-away just passed in the spending putrid bill, courtesy of the White House and a bunch of Congressional Democrats.
The background on "bonus depreciation" costs from Citizens for Tax Justice:
Bonus depreciation could be far more costly than it appears. The official revenue estimate provided by Congress’s Joint Committee on Taxation (JCT) shows that this tax break will reduce revenue by $1.5 billion. However, if Congress continues to extend these tax breaks throughout the coming decade — a very real possibility given Congress’s history in recent years — bonus depreciation will reduce revenue by $244 billion over that period, accounting for 35 percent of the cost of tax extenders and the most expensive provision in the package. This is explained in the box on the following page.
Bonus depreciation is a significant expansion of existing breaks for business investment. Unfortunately, Congress does not seem to understand that business people make decisions about investing and expanding their operations based on whether or not there are customers who want to buy whatever product or service they provide. A tax break subsidizing investment will benefit those businesses that would have invested anyway but is unlikely to result in much, if any, new investment.
Companies are allowed to deduct from their taxable income the expenses of running the business, so that what’s taxed is net profit. Businesses can also deduct the costs of purchases of machinery, software, buildings and so forth, but since these capital investments don’t lose value right away, these deductions are taken over time. In other words, capital expenses (expenditures to acquire assets that generate income over a long period of time) usually must be deducted over a number of years to reflect their ongoing usefulness.
In most cases firms would rather deduct capital expenses right away rather than delaying those deductions, because of the time value of money, i.e., the fact that a given amount of money is worth more today than the same amount of money will be worth if it is received later. For example, $100 invested now at a 7 percent return will grow to $200 in ten years.
Bonus depreciation is a temporary expansion of the existing breaks that allow businesses to deduct these costs more quickly than is warranted by the equipment’s loss of value or any other economic rationale.
A report from the Congressional Research Service reviews efforts to quantify the impact of bonus depreciation and explains that “the studies concluded that accelerated depreciation in general is a relatively ineffective tool for stimulating the economy.”
That CRS study also
says:
Most economists would agree that investment in the assets eligible for the expensing allowance is driven more by expectations for future growth in sales and profits by firms that use these assets, the nature of the assets, and conditions in debt and equity markets than by tax considerations.
Essentially, it says: this is just free money corporations pocket and has little or no bearing on whether a company will act on a particular investment.
Now, to the right-wing business press: The Wall Street Journal:
With Congress poised to extend a raft of tax breaks, consider this: One such break has helped AT&T Inc. and Verizon Communications Inc. slash their recent tax bills by billions of dollars without leading to the intended increase in investment or jobs.
The measure, known as “bonus depreciation,” lets companies offset their income with investments they have made more quickly. It was enacted in 2008 as part of the economic stimulus package with the goal of giving companies an incentive to build more factories or upgrade more equipment, creating jobs and giving a boost to sluggish economic growth in the process.
But that isn’t how it has worked, at least at AT&T and Verizon, whose vast networks of towers and cables make them two of the country’s biggest investors in infrastructure.
AT&T estimated its federal tax bill last year at $3 billion, down from about $5.9 billion in 2007, before the tax relief was enacted. Verizon estimated that it would get $197 million back last year, compared with a 2007 bill of $2.6 billion.
Meanwhile, the companies have kept their capital spending relatively flat since the stimulus was adopted, and their employee count has dropped by more than 100,000 people, a fifth of their combined work forces.
[emphasis added]
So, essentially, the companies screwed the people twice: firing tens of thousands of people from jobs and, then, dipping back into their pockets via the Treasury to take tax money (paid out of hard-earned wages) to reduce their tax bills.
By the way, the CEO of AT&T, Randall L. Stephenson, made over $20 million last year, including new stock awards of $13,566,538, ranking him #59 in the 2014 Equilar Top 200 Highest Paid CEO ranks. The CEO of Verizon, Lowell C. McAdam, ranked only #117, and was paid, poor soul, a paltry $15.7 million, including $9,375,077 in new stock grants.
Where do you think the free money pocketed by these companies goes, if it isn't creating new jobs?
Uh, huh.