Current Events - January 2, 2013

Tax Hike in Perspective:

This image illustrates the difference between the annual tax increase from the Senate-approved Fiscal Cliff bill ($62 billion) and the actual 2011 U.S. Budget Deficit ($1.089 TRILLION).

Senate Voted on ‘Fiscal Cliff’ Bill 3 Minutes After Receiving It

The U.S. Senate voted 89-8 to approve legislation to avoid the fiscal cliff despite having only 3 minutes to read the 154-page bill and budget score.

Multiple Senate sources have confirmed to CNSNews.com that senators received the bill at approximately 1:36 AM on Jan. 1, 2013 – a mere three minutes before they voted to approve it at 1:39 AM.

The bill is 154-pages and includes several provisions that are unrelated to the fiscal cliff, including repealing a section of ObamaCare, extending the wind-energy tax credit, and a rum tax subsidy deal for Puerto Rican rum makers.

The bill avoids the fiscal cliff by making permanent the Bush tax cuts for everyone making $450,000 per year or less and putting off the automatic spending cuts (sequestration) from last year’s debt ceiling deal until March.

Technically, those Bush tax rates had expired at midnight on Dec. 31, 2012 and the spending cuts were scheduled to take place when the government reopened following the New Year’s Day holiday

So, yes, a bill that would later make its way down to the lower chamber and find approval in the House was never actually read in its entirety by the Senate. So what's new? Do any of them do their jobs?

http://cnsnews.com/news/article/senate-voted-fiscal-cliff-bill-3-minutes-after-receiving-it 

Liberal Ex-Columnist's Death Threats published in Des Moines Register

Donald Kaul retired earlier this year. Now he has decided to return to writing occasional opinion columns for OtherWords.org. The Sandy Hook Elementary School shooting in Newtown, Conn. brought out all his ugliness.

In a column that appeared after the shooting with the headline "Kaul: Nation needs a new agenda on guns," he proposed a new liberal agenda: repeal the Second Amendment, declare the NRA a terrorist organization and make membership illegal, and well, make violent threats to Republican leaders and NRA members. The Des Moines Register published this junk on December 29.

"I would tie Mitch McConnell and John Boehner, our esteemed Republican leaders, to the back of a Chevy pickup truck and drag them around a parking lot until they saw the light on gun control," he wrote. Is that a threatening James Byrd reference?  "And if that didn’t work, I’d adopt radical measures," he continued.

This was how he spelled out the other agenda items, which included killing NRA members who wouldn't surrender their arms:

"Here, then, is my “madder-than-hell-and-I’m-not-going-to-take-it-anymore” program for ending gun violence in America:

• Repeal the Second Amendment, the part about guns anyway. It’s badly written, confusing and more trouble than it’s worth. It offers an absolute right to gun ownership, but it puts it in the context of the need for a “well-regulated militia.” We don’t make our militia bring their own guns to battles. And surely the Founders couldn’t have envisioned weapons like those used in the Newtown shooting when they guaranteed gun rights. Owning a gun should be a privilege, not a right.

• Declare the NRA a terrorist organization and make membership illegal. Hey! We did it to the Communist Party, and the NRA has led to the deaths of more of us than American Commies ever did. (I would also raze the organization’s headquarters, clear the rubble and salt the earth, but that’s optional.) Make ownership of unlicensed assault rifles a felony. If some people refused to give up their guns, that “prying the guns from their cold, dead hands” thing works for me."

The so-called "news" media love to blame conservatives for the declining civility of our democratic discourse, but the hateful venom spewed by supposedly enlightened liberals like Kaul is as vicious as it gets.

Publishing death threats is bad enough, but doing so in the name of promoting a more peaceful, compassionate society is beyond sick. But this clown will probably never realize the absurdity of his argument.

http://www.foxnews.com/opinion/2013/01/02/liberal-ex-columnist-death-threats-published-in-des-moines-register/

From NASCAR to rum, the 10 weirdest parts of the ‘fiscal cliff’ bill

By now, we’ve heard all about the big stuff in the fiscal cliff bill that finally passed on Tuesday. The Bush tax cuts will become permanent for all individual income below $400,000 (and family income below $450,000). 
The sequester spending cuts will be delayed two months. And so on.

We’re handing it out. (AP)

But Congress also managed to include all sorts of corporate tax breaks and other arcane provisions into the final bill, covering everything from electric scooters to NASCAR racetracks to taking the subway to work. Most of these tax breaks were already longstanding provisions — Congress has been working to renew them all year. They’re just being extended again for another year (or sometimes two), at a total cost of roughly $77 billion.

So let’s take a look at 10 of the more curious tax provisions in the fiscal cliff bill—it offers some insight into how messy the tax code is, and will continue to be for another year. (You can find the full text of the cliff bill here, with the individual tax extenders in Title II and the corporate tax extenders in Title III.)

1. A $9 billion “sop for Wall Street banks and major multinationals”

Check out Section 322 of the bill. “Extension of the Active Financing Exception to Subpart F.” Sounds dull, right? Not quite.

As Dan Eggen has reported, this provision, first created in 1997, allows manufacturers and banks to defer taxes when they engage in a special type of financial transactions known as “active financing.” The break now costs $9 billion per year, and critics claim it encourages firms to create jobs overseas. But it’s a top lobbying priority for companies like GE and JP Morgan, who say that it helps them compete abroad, and it will get extended another year.

Now, there are a ton of other costly business tax breaks in the deal, too, from tax credits for R&D to bonus depreciation (which studies have found are ineffective at stimulating the economy). But the $9 billion active financing credit was arguably the hardest-fought.

2. A rum tax for Puerto Rico

Another longstanding item—this one dates back to 1917. Congress currently levies an excise tax worth $13.50 per gallon on all rum produced in or imported to the United States. Most of that money is transferred to Puerto Rico and the Virgin Islands, who use the revenue to support their rum industries. In 2009, this tax raised some $547 million. The cliff deal would extend the current arrangement another year. (By the way, Puerto Rico’s non-voting representative in the House, Pedro Pierluisi, thinks this tax set-up is too favorable to rum distillers.)

3. Cheaper office space for Goldman Sachs

Okay, it’s certainly not called this. Section 328 of the bill extends tax-exempt financing for the “Liberty Zone,” the area around the former World Trade Center, for another year. As Matt Stoller points out, this tax provision was supposed to help fund reconstruction after 9/11. Yet a recent Bloomberg investigation found the bonds have mostly helped finance new luxury apartments, not to mention the construction of Goldman Sachs’ new headquarters. Developers say the bonds were necessary to revitalize downtown Manhattan, but there’s a fierce debate over how they’ve been used.

4. Help NASCAR build racetracks

The so-called NASCAR loophole, in place since 2004, allows anyone who builds a racetrack to receive a small tax benefit through accelerated depreciation. This tax break cost roughly $43 million the past two years and will get extended for another year. Sounds tawdry, right? And yet, supporters claim the break is necessary so that NASCAR can compete on a level playing field with other theme parks. Looks like they got their wish.

5. Treat coal from Indian lands as an alternative energy source

The fiscal cliff deal has a bunch of provisions for clean energy—notably, it extends a key tax credit for wind power for one more year, thus preventing the U.S. wind industry from downsizing. (That credit will cost about $1.2 billion per year for 10 years.)

But the production tax credit isn’t just for renewable energy sources like wind. There’s also a provision, section 406, to continue subsidizing coal produced on Indian lands at about $2 per ton. Again, this isn’t new. Nor is it a huge deal (it will only cost about $1 million). But it’s a reminder that not all of the clean-energy provisions in the bill are entirely green.

6. Promote plug-in electric scooters.

For years, Congress has been trying to promote electric cars through various tax breaks and subsidies. But what about electric bikes and scooters? Section 403 of the bill extends a credit for “2- or 3-wheeled plug-in electric vehicles.” Yes, these things do exist: The Observer recently reported that e-bikes have become ubiquitous in New York City, used for everything from Chinese food deliveries to expensive joyrides. Only problem? They might well be illegal to ride in New York, although the rules here are awfully confusing.

7. Repair the railroads

Section 306 of the fiscal cliff bill will extend a hefty tax credit to railroads for maintenance work. Congress originally passed this credit because there was a worry that many of the hundreds of “short line railroads” would abandon their small sections of track, which would in turn fracture the national shipping network. This credit costs about $165 million per year and will survive another year.

8. Subsidize Hollywood films

The fiscal cliff bill renews “special expensing rules for certain film and television productions,” at a cost of some $75 million per year. Studios in Hollywood and elsewhere can deduct up to $15 million of their costs if more than three-fourths of the movie’s production takes place in the United States. (They can get up to $20 million in deductions if they produce the film in a low-income community.)

9. Crack down on tax cheats… in prison

The Internal Revenue Service has long worked with state and federal prisons to tamp down on fraud among prisoners who are filing tax returns. Yet as more and more states have been contracting out their jails and prisons to for-profit companies, the IRS has had difficulty sharing its data with private contractors. Never fear, section 209 of the fiscal cliff bill addresses this concern and allows the IRS to share its files with private prisons.

10. Provide incentives for commuters to take the bus or train

Hey, not all of the lesser-known aspects of the fiscal cliff deal are seedy giveaways to big corporations. There’s also a small tax break that gives people incentives to take mass transit. (This provision was originally part of the 2009 stimulus but expired last year.)

For the past year, the tax code has subsidized driving to work over taking transit. If you drove, your employer could cover up to $240 per month in parking expenses tax-free. If you took the bus, your employer could only cover $125 in expenses per month tax-free. The two benefits have now been set at equal levels once again for 2012 (retroactively) and 2013. There’s some evidence that this change will induce more people to take transit to work, though it will cost $220 million.

http://www.washingtonpost.com/blogs/wonkblog/wp/2013/01/02/from-nascar-to-rum-the-10-weirdest-parts-of-the-fiscal-cliff-deal/

Eight Corporate Subsidies in the Fiscal Cliff Bill, From Goldman Sachs to Disney to NASCAR

Most tax credits drop straight to the bottom line – it’s why companies like Enron considered its tax compliance section a “profit center”. A few hundred billion dollars of tax expenditures is a major carrot to offer. Surely, a modest hike in income taxes for people who make more than $400k in income and stupid enough not to take that money in capital gain would be worth trading off for the few hundred billion dollars in corporate pork. This is what the fiscal cliff is about – who gets the money. And by leaving out the corporate sector, nearly anyone who talks about this debate is leaving out a key negotiating partner.

So without further ado, here are eight corporate subsidies in the fiscal cliff bill that you haven’t heard of.

1) Help out NASCAR - Sec 312 extends the “seven year recovery period for motorsports entertainment complex property”, which is to say it allows anyone who builds a racetrack and associated facilities to get tax breaks on it. This one was projected to cost $43 million over two years.

2) A hundred million or so for Railroads - Sec. 306 provides tax credits to certain railroads for maintaining their tracks. It’s unclear why private businesses should be compensated for their costs of doing business. This is worth roughly $165 million a year.

3) Disney’s Gotta Eat - Sec. 317 is “Extension of special expensing rules for certain film and television productions”. It’s a relatively straightforward subsidy to Hollywood studios, and according to the Joint Tax Committee, was projected to cost $150m for 2010 and 2011.

4) Help a brother mining company out – Sec. 307 and Sec. 316 offer tax incentives for miners to buy safety equipment and train their employees on mine safety. Taxpayers shouldn’t have to bribe mining companies to not kill their workers.

5) Subsidies for Goldman Sachs Headquarters – Sec. 328 extends “tax exempt financing for  York Liberty Zone,” which was a program to provide post-9/11 recovery funds. Rather than going to small businesses affected, however, this was, according to Bloomberg, “little more than a subsidy for fancy Manhattan apartments and office towers for Goldman Sachs and Bank of America Corp.” Michael Bloomberg himself actually thought the program was excessive, so that’s saying something. According to David Cay Johnston’s The Fine Print, Goldman got $1.6 billion in tax free financing for its new massive headquarters through Liberty Bonds.

6) $9B Off-shore financing loophole for banks – Sec. 322 is an “Extension of the Active Financing Exception to Subpart F.” Very few tax loopholes have a trade association, but this one does. This strangely worded provision basically allows American corporations such as banks and manufactures to engage in certain lending practices and not pay taxes on income earned from it. According to this Washington Post piece, supporters of the bill include GE, Caterpillar, and JP Morgan. Steve Elmendorf, super-lobbyist, has been paid $80,000 in 2012 alone to lobby on the “Active Financing Working Group.” 

7) Tax credits for foreign subsidiaries –  Sec. 323 is an extension of the “Look-through treatment of payments between related CFCs under foreign personal holding company income rules.” This gibberish sounding provision cost $1.5 billion from 2010 and 2011, and the US Chamber loves it. It’s a provision that allows US multinationals to not pay taxes on income earned by companies they own abroad.

8) Bonus Depreciation, R&D Tax Credit – These are well-known corporate boondoggles. The research tax credit was projected to cost $8B for 2010 and 2011, and the depreciation provisions were projected to cost about $110B for those two years, with some of that made up in later years.

Conveniently, the Joint Committee on Taxation in 2010 did an analysis of what many of these extenders cost. You can find that report here.

Enjoy!

http://www.nakedcapitalism.com/2013/01/eight-corporate-subsidies-in-the-fiscal-cliff-bill-from-goldman-sachs-to-disney-to-nascar.html

An Optimistic Take On the “Cliff” Deal

Here are some glass-half-full observations on last night’s McConnell-Biden fiscal deal from an inveterate optimist.

 Raising taxes on those who are already paying roughly double their fair share, while leaving everyone else’s taxes the same, is lousy public policy. But from the Republicans’ point of view, it may be good politics. For the last four years, the Obama administration has run up unprecedented deficits, adding more than $4 trillion to the national debt. How has President Obama justified such profligacy? He has been a broken record: his mantra is that we just need to increase taxes on the “wealthy,” restoring them to Clinton-era rates, and then everything will be fine. He has never offered any other plan either to raise revenue, or to control spending. Raising taxes on upper-income taxpayers is the only card in his deck.

Knowledgeable observers always knew that nothing Obama said about fiscal matters made any sense, because raising income tax rates on the “rich” barely makes a dent in the deficit. But we learned in November that most voters are not knowledgeable. President Obama won re-election, and now he has gotten his way: marginal income tax rates on high earners are being restored to Clintonian levels (assuming the House goes along). Isn’t that, for the Democrats, an ominous development? Their call for higher taxes on the rich was never a serious policy proposal; it was always sheer demagoguery. It was a politically popular way to deflect all meaningful talk about the budget. 

But what happens now that Obama has gotten his way? It will soon become apparent that the fiscal cliff deal, including precisely the tax increases that Obama has been demanding for four years, makes hardly a dent in the deficit. At best, it will reduce the deficit by five or six percent. We will continue to run up deficits of close to $1 trillion a year, and the national debt will continue to grow, as Obama has always intended. This fact can’t be hidden; it will be reported. Journalists who have pulled their punches in the past because they wanted Obama to be re-elected will now begin to ask, what are we going to do about the deficit and the debt? At some point, perhaps sooner rather than later, interest rates will begin to rise, at which point the debt issue will become a crisis. And Republicans will say: we told you so.

The Democrats will have only three choices: they can try to raise taxes on the “rich” even higher. But raising them to 100% wouldn’t deal with the deficit, even if you assume all those rich people are willing to work for free. The second option is to restrain federal spending. The Democrats would rather die than do that. The third option is to try to raise taxes on all those millions of Americans who aren’t rich. That is what the Democrats will do once the moment arrives when they can no longer ignore the trillions of dollars in debt they are inflicting on our children. That will be, politically, a very bad moment for the Democrats and a very good one for the Republicans, who can offer the alternative of less spending and who will have been proved right with respect to the biggest policy debate of recent years.

All of this is another way of saying that, with the Democrats’ BS about raising taxes on the rich out of the way, we can have a rational debate about the country’s fiscal future. And that is a debate the GOP can win, as most voters continue to believe that it is better to cut spending than to raise taxes on them. So let’s not despair: the post-cliff landscape may well prove favorable to the sorts of reforms that have been impossible for the last four years.

http://www.powerlineblog.com/archives/2013/01/an-optimistic-take-on-the-cliff-deal.php

Report: Al Jazeera Set to Take Over Al Gore’s Current TV

Al Jazeera is close to finishing a deal to take over Al Gore’s low-rated Current TV, the New York Times reported Wednesday:

If the deal is completed, Current will provide the pan-Arab news giant with something it has sought for years: a pathway into American living rooms. Current is available in about 60 million of the 100 million homes in the United States with cable or satellite service.

Rather than simply use Current to distribute its existing English-language channel, called Al Jazeera English and based in Doha, Qatar, Al Jazeera will create a new channel based in New York, according to people with knowledge of the deal negotiations. Potentially called Al Jazeera America, roughly 60 percent of the programming will be produced in the United States while the remaining 40 percent will come from Al Jazeera English.

Al Jazeera may absorb some Current TV staff members, according to the people, who insisted on anonymity because they were not authorized to speak publicly. But Current’s schedule of shows will most likely be dissolved in the spring.

Executives from Al Jazeera and Current did not immediately comment to the Times. There was no word about the price of the sale.

http://www.theblaze.com/stories/report-al-jazeera-set-to-take-over-al-gores-current-tv/

Which Obama Executive Order Did the House Overwhelmingly Overturn Yesterday?

President Barack Obama made waves last Friday when — amid a fierce fiscal cliff debate — he signed an executive order ending the pay freeze on certain federal workers.  Beneficiaries to see a pay boost included Vice President Joe Biden and members of Congress.

Though the raises were relatively modest (at least for a government that runs trillion-dollar deficits)– about $900/year for members of Congress and $6,000/year for Biden– the Weekly Standard writes that the executive order would cost the taxpayer roughly $11 billion over the next ten years.

On Tuesday night, the U.S. House of Representatives approved legislation blocking the pay raise.

“Unbelievably, in the middle of talks this week on tax rates and sequestration revision, in the midst of high deficits and a growing national debt, the president has proposed pay increases for members of Congress,” Rep. Mike Fitzpatrick (R-Pa.) summarized. “I have to say that nobody in this town saw this coming, and very few think it is warranted.”

The measure received immense bipartisan support, passing 287-129, with 55 Democrats voting with Republicans against the president’s proposal.

(Photo: Twitter/@GOPLeader)

The Washington Post has more information:

The GOP-backed bill introduced late Monday would freeze the salaries of lawmakers and the nation’s 2 million federal employees for the remainder of fiscal 2013. Currently, federal worker salaries are frozen through the end of a short-term spending agreement that expires in March. As part of efforts to curtail the deficit, federal employees have not seen a cost of living increase in their paychecks in more than three years.

http://www.theblaze.com/stories/which-obama-executive-order-did-the-house-overwhelmingly-overturn-on-tuesday/