Thursday, June 30, 2011

Wrong tax provision!!!


I don't know why this conservative news outlet-spread misinformation is being allowed to grow like this. The National Journal and other basic-research capable news outlets have all been able to find out this simple fact- the stimulus tax provision, which applied to millions of corporations across countless goods, is different from the tax break actually being discussed.

10 comments:

TJE said...

Oh, I get it. Provision 1 is good public policy that helped to save or create millions and millions of jobs. Provision 2 is a loophole benefiting evil corporate fat cats.

TJE said...

Was the reauthorization of the provision not in the stimulus?

http://blog.heritage.org/2011/06/30/white-house-wastes-time-attacking-heritage-2/

PL said...

Provision 1 may be an appropriate response to a recession in that it temporarily accelerates depreciation widespread across the economy and all firms in order to encourage investment boosts at a time when the economy is tanking (and firms are generally cutting back on investment) in order to boost aggregate demand, save jobs, and help the economy recovery faster.

(I included the "may be" not because I doubt it's value as being valid in a recession, but because I don't know enough to be certain it's the policymaking ideal. However, theoretically-speaking it makes sense to me. I don't know much about the empirical literature however on this specific of a tax provision, and maybe their are other factors I'm not thinking of off the top of my head. Hence my inclusion of the slight qualifier).

Provision 2 is a economically-distortive tax preference with limitd justification and should be one of the first things to go as part of deficit-reduction, especially when we are considering also making major cuts to important government programs like Medicaid, Pell, etc.

There is a difference between the two provisions- particularly in the timing (temporary vs. permanent), but also in the application (across firms, industries, etc.).

TJE said...

Do you agree with Heritage that Provision 2 was re-enacted in 2009?

TJE said...

Oops, I meant reauthorized?

PL said...

As far as I can determine, the Recovery Act (btw, glad to see conservatives finally acknowledging it was heavy on tax cuts, a fact which creates lots of inconsistencies for their arguments) and tax cut-UI deal of last December both extended a very broad tax treatment policy (previously modified in 2008 after being created in 2002)- i.e. Provision 1. This is different (though maybe it interacts somehow?) with Provision 2, the 1987-created preferential treatment of corporate jets versus commercial ones. Provision 2 is the one that I've read was being discussed in the deficit negotiations.

All of which ignores the fact that we are now talking about deficit reduction, which means changing and cutting all sorts of tax provisions and government programs that policymakers from both parties have voted for in past years.

TJE said...

Perhaps Lachlan will join the discussion to clarify his reporting.

I think POTUS erred by harping so much about a provision with neglible fiscal effect.

PL said...

I think its a policymaking error for the country that the discussion has moved to such piddling revenue sources.

PL said...

And I'll note that I didn't notice the original Lachlan connection until the later Heritage post cited his name. With my original post, would have toned down my response if I had realized it was in response to someone we knew. Probably less exclamation points...

TJE said...

AP article from February, 2009.