Corporate tax reform is dead — so why are companies fighting it so hard? - News and Current Events | futures trading

Go Back

> Futures Trading, News, Charts and Platforms > Traders Hideout > News and Current Events

Corporate tax reform is dead — so why are companies fighting it so hard?
Started:May 8th, 2014 (09:29 PM) by kbit Views / Replies:116 / 0
Last Reply:May 8th, 2014 (09:29 PM) Attachments:0

Welcome to

Welcome, Guest!

This forum was established to help traders (especially futures traders) by openly sharing indicators, strategies, methods, trading journals and discussing the psychology of trading.

We are fundamentally different than most other trading forums:
  • We work extremely hard to keep things positive on our forums.
  • We do not tolerate rude behavior, trolling, or vendor advertising in posts.
  • We firmly believe in openness and encourage sharing. The holy grail is within you, it is not something tangible you can download.
  • We expect our members to participate and become a part of the community. Help yourself by helping others.

You'll need to register in order to view the content of the threads and start contributing to our community. It's free and simple, and we will never resell your private information.

-- Big Mike

Thread Tools Search this Thread

Corporate tax reform is dead — so why are companies fighting it so hard?

Old May 8th, 2014, 09:29 PM   #1 (permalink)
Elite Member
Aurora, Il USA
Futures Experience: Advanced
Platform: TradeStation
Favorite Futures: futures
kbit's Avatar
Posts: 5,839 since Nov 2010
Thanks: 3,275 given, 3,321 received

Corporate tax reform is dead — so why are companies fighting it so hard?

Politicians of every persuasion speak in harmony when it comes to corporate-tax reform that would lower rates, close loopholes and simplify the code: They agree it’s necessary and overdue — and that there’s almost no chance it will happen anytime soon.

So why is Big Business getting worked up in a lather to oppose the elimination of tax breaks that face no real chance of being eliminated?

Industries from banking to advertising to Big Oil are mobilizing to oppose specific provisions in the leading (though probably doomed) tax-reform package drafted by House Ways and Means Chairman Dave Camp (R-Mich.). Pop into any trade-group conference and it’s a good bet someone will be rallying the troops to forestall the scary provisions of loophole-plugging measures that have no legislative momentum.

Alarming, enraging

In order to pay for a potential drop in the top federal corporate tax rate to 25% from 35% and fund a popular effort to slash taxes on foreign-earned profits, the 979-page Camp draft includes dozens of specific tax changes that alarm or enrage one industry or another.

The idea of levying a small quarterly tax on “too-big-to-fail” banks to pay for their implicit government guarantee and to tax huge windfalls from hedge-fund or private-equity earnings as ordinary income prompted Wall Street banks to suspend fundraising for Republicans.

A proposal to mark-to-market all derivatives trades (such as options used to hedge a stock investment) and treat on-paper profits as taxable gains has lobbyists for the securities industry and options exchanges drawing their bayonets. Eliminating tax deductions for advertising spending has sparked opposition not only on Madison Avenue but also from businesses that rely most heavily on consumer marketing such as auto manufacturers, beverage companies, consumer-product makers and pharmaceutical producers. Energy companies are fighting possible tougher tax treatment on how they report exploration expenses.

Corporate emissaries working to preserve tax-code goodies is one of the oldest stories in D.C., and wouldn’t be noteworthy if not for the fact that the Camp reform package won’t see the light of a floor vote in the foreseeable future. Camp himself is retiring, as is Sen. Max Baucus (D-Mont.), who has joined Camp in the thankless, multi-year effort to revamp the tax code. House Republicans have scant appetite to fight this out in a mid-term election year, and the Obama administration isn’t making it much of a priority either.

Given all that, there are at least three plausible reasons for the corporate-tax panic making its way through so many corners of the private sector:

Some members of Congress might see these loophole-closers as easy revenue-boosting measures now that they’ve been aired publicly.

Dan Clifton, head of policy research at Strategas Group, says: “What really scares these industries is now that Camp, a conservative Republican, put forth these tax changes, Democrats will cherry-pick the revenue raisers to pay for the highway bill they are working on without the corporate rate reduction. Can’t you see it now – traitor companies are eroding the U.S. tax base while the U.S. infrastructure rots.”

The Camp approach would have allotted $126 billion of newly raised revenue toward infrastructure projects that are in jeopardy now that highway-bill funding needs to be replenished.

Indeed, GOP lawmakers are actively defending against the idea that the revenue-raising provisions of Camp’s proposal be treated as a menu of cash-generating options to be ordered piecemeal, without the tax-rate-reduction and simplification the overall reform package promises.

The Camp draft proposal will now serve as the starting point for any and all efforts to remake the tax code in coming years. Camp’s work on the draft has the respect of both parties, and is considered a thorough, good-faith effort to engage the issue on all of its complexity.

It is written to be “revenue neutral,” which eliminates Republican concerns that it would add to the deficit. And it’s also “distributionally neutral,” meaning high-income taxpayers don’t disproportionately benefit, which is a prerequisite for Democratic support.

Therefore, companies feel they need to play a long game in generating and maintaining pressure against particular provisions they believe would hurt their business. Any time a future Congress approaches the issue, this document and these proposals will be there as the raw material for a potential bill, so lobbyists want to act early and steadily to undermine them.

Companies are further on edge because of the current heightened public attention on both wealth inequality and corporate tax-minimization maneuvers.

The news that Pfizer Inc. (PFE) is proposing to move to the U.K. for tax purposes, in a so-called tax inversion, if it succeeds in acquiring London-based AstraZeneca PLC (AZN) for $100 billion was one glaring example of the ways big companies shop the globe for favorable tax treatment. Apple Inc.’s (AAPL) decision to sell debt to fund its stock buybacks rather than pay taxes on its huge store of cash held overseas was another.

Clifton adds: “In a way, these corporate inversions are stoking a renewed interest in tax reform. While tax reform may not happen this year, further inversions are a sign that companies do not believe tax reform will happen in the next two years and they are rushing in to get access to their foreign source profits which are locked up overseas.”

eBay Inc.’s (EBAY) decision last week to take a charge against possible taxes on up to $9 billion of its overseas cash it might bring home is another hint that Corporate America sees no likely tax reform on repatriating foreign funds anytime soon.

The rapid and rabid opposition to various individual loophole-sealing notions in the Camp bill also presents a sobering reality check for those who insist corporate tax reform is somehow a no-brainer bipartisan win-win proposition.

The fact is that dropping tax rates while remaining revenue-neutral is simply not possible without companies giving up favored tax codicils they deem essential. If Camp’s thoughtful, balanced approach can’t get an open hearing because it singes too many business interests, then will real corporate tax reform ever be anything more than an empty bipartisan applause line?

Reply With Quote

Reply > Futures Trading, News, Charts and Platforms > Traders Hideout > News and Current Events > Corporate tax reform is dead — so why are companies fighting it so hard?

Thread Tools Search this Thread
Search this Thread:

Advanced Search

Upcoming Webinars and Events (4:30PM ET unless noted)

An Afternoon with FIO trader bobwest

Elite only

NinjaTrader 8: Programming Profitable Trading Edges w/Scott Hodson

Elite only

Anthony Drager: Executing on Intermarket Correlations & Order Flow, Part 2

Elite only

Adam Grimes: Five critically important keys to professional trading

Elite only

Machine Learning Concepts w/FIO member NJAMC

Elite only

MarketDelta Cloud Platform: Announcing new mobile features

Dec 1

NinjaTrader 8: Features and Enhancements

Dec 6

Similar Threads
Thread Thread Starter Forum Replies Last Post
Tax Reform May Happen at State, Not Federal, Level Quick Summary News and Current Events 0 January 13th, 2013 06:30 PM
CEO Drumbeat for Corporate Tax Reform Grows Louder Quick Summary News and Current Events 0 November 8th, 2012 08:40 PM
U.S. corporate tax rate poised to become highest kbit News and Current Events 0 March 27th, 2012 03:32 PM
Obama to pitch lower corporate tax kbit News and Current Events 0 February 10th, 2012 07:05 PM
With Reform Battle Over, Obama Turns to Bank Tax Quick Summary News and Current Events 1 June 26th, 2010 02:48 PM

All times are GMT -4. The time now is 12:13 PM.

Copyright © 2016 by All information is for educational use only and is not investment advice.
There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
no new posts

Page generated 2016-10-24 in 0.09 seconds with 19 queries on phoenix via your IP