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Tag: tax credits
When Biden's Partisan Objectives Clash With His Urgent Climate Goals

When Biden's Partisan Objectives Clash With His Urgent Climate Goals

The Biden administration, to its credit, never misses a chance to emphasize the importance of dealing with climate change. President Joe Biden calls it an "existential" threat to humanity. John Kerry, his special envoy on the issue, said in April: "That means life and death. And the question is, are we behaving as if it is? And the answer is no."

That was certainly true under former President Donald Trump, who championed coal, abandoned the 2015 Paris agreement on climate, and dismissed global warming as a hoax. Biden has brought a badly needed shift on policy. But his policies sometimes are at war with his rhetoric.

One crucial part of his agenda is speeding the transition from gasoline-powered vehicles to electric ones. Cars and light trucks account for 16 percent of all U.S. greenhouse gas emissions, and Biden wants half of all autos sold in this country to be electric or plug-in hybrids by 2030. That transition would significantly reduce carbon output.

But let's not get the idea that the administration is laser-focused on whatever it takes to curb climate change. Its enthusiasm for electric vehicles, it turns out, is not unlimited. In Biden's eyes, some electric vehicles are good and some are bad, and the difference has nothing to do with greenhouse gases.

The social spending and climate package recently approved by the House of Representatives would encourage Americans to buy electric vehicles by providing a tax credit of as much as $12,500 for each purchase, an increase over the existing $7,500 credit. That indirect subsidy is needed because these cars generally cost more to purchase than comparable conventional cars.

But Biden and his congressional allies are not enamored of all electric vehicles. They want to restrict the full tax break to those cars that are built by union workers in the United States and have batteries built by union workers in the United States. Buyers of other vehicles would get only a $7,500 credit — a $5,000 penalty.

That penalty would apply to almost all of the 50 electric vehicles currently sold here, including every model made by Tesla, the Ford Mustang Mach-E, the Nissan Leaf, the Rivian pickup, the Hyundai Ioniq, and more. The only exceptions are two Chevy Bolt models. It would also harm workers in U.S. plants operated by foreign automakers, which are nonunion and produce nearly half of all the vehicles sold here.

The discrimination is a giant favor to the United Auto Workers, a stalwart of the Democratic Party that has been weathering a major corruption scandal. "The union has stressed to the Biden administration that the country shouldn't sacrifice union jobs to meet its climate goals," reported The Wall Street Journal. A White House spokesman insisted that "jobs taking on the climate crisis must also be jobs that build the middle class."

There are some obvious flaws in the administration's logic. One is that given the monumental size of the battle against climate change, it is imperative to enlist every automaker, including nonunion ones.

To exclude nearly all electric cars from the full tax credit will make the national transition away from gas-powered vehicles — a hugely formidable undertaking under the best of circumstances — slower and more expensive. It's exactly the wrong strategy if you place a supreme priority on saving the planet from excessively high temperatures.

The UAW has repeatedly lost elections allowing workers at foreign-owned plants to decide whether to sign up with the union. Limiting the tax credit will hurt those workers. It will also encourage automakers to build electric cars abroad, where they can achieve lower labor costs — enough, perhaps, to overcome the tax disadvantage.

It will also be a boon to the internal combustion engine. As Jeffrey Schott, a senior fellow at the Peterson Institute for International Economics, told me, "If you raise the cost of electric vehicles too much, people will buy gas-powered cars."

The Trump administration refused to require any sacrifice from fossil fuel companies and their employees merely to avert the worst-case climate scenario. The Biden administration is willing to act against climate change, but it too insists on protecting certain groups at the expense of the broad American public — and all humanity.

Denying the full tax credit to the vast majority of electric vehicles will mean more carbon emissions and warming of the planet. But hey — it's not like this is a matter of life and death, right?

Follow Steve Chapman on Twitter @SteveChapman13 or at https://www.facebook.com/stevechapman13. To find out more about Steve Chapman and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.

Two Appellate Courts Differ On Key Tax Plank In Health Care Law

Two Appellate Courts Differ On Key Tax Plank In Health Care Law

By Michael Doyle and Tony Pugh, McClatchy Washington Bureau

WASHINGTON — Two appeals courts on Tuesday split over the Affordable Care Act, reaching different conclusions about whether tax credits can help consumers buy coverage in the 36 states that use the federal health insurance marketplace.

The conflicting and nearly simultaneous rulings potentially tee up for the Supreme Court its next landmark health care case, and leave in limbo the Obama administration’s health care ambitions.

In a 2-1 ruling, the U.S. Court of Appeals for the D.C. Circuit concluded the Obama administration stretched the law too far in extending the subsidies through the HealthCare.gov website.

“We reach this conclusion, frankly, with reluctance,” Judge Thomas Griffith wrote, noting that “our ruling will likely have significant consequences both for the millions of individuals receiving tax credits through federal exchanges and for health insurance markets more broadly.”

More bluntly, Senior Judge Harry Edwards called the challenge in his dissent a “not-so-veiled attempt to gut” the health care law. The one thing all sides agreed on was the significance of the case.

From the right, Texas Republican Senator Ted Cruz cheered the ruling as “a repudiation of Obamacare and all the lawlessness that has come with it. From the left, Ron Pollack, executive director of Families USA, called the D.C. court’s decision “the high-water mark for Affordable Care Act opponents.”

But while the D.C.-based court struck down the tax credit, the Richmond, Virginia-based U.S. 4th Circuit Court of Appeals reached a different conclusion about the same set of facts.

In its unanimous decision, the three-judge panel of the Richmond-based appellate court called extension of the tax credits by the Internal Revenue Service a “permissible exercise of the agency’s discretion.”

“It is … clear that widely available tax credits are essential to fulfilling the Act’s primary goals and that Congress was aware of their importance when drafting the bill,”‘ Judge Roger Gregory wrote, adding that “the economic framework supporting the Act would crumble if the credits were unavailable on federal exchanges.”

The disagreement between the two circuit courts is a recipe for eventual Supreme Court action, as resolving so-called circuit splits is one of the high court’s top priorities. Two other federal courts are still considering similar challenges.

The challengers argue that the health law doesn’t allow the federal government to provide subsidies — which help people purchase health coverage — in states that use the federal marketplace.

A section of the health care law says the tax credits can only be applied to coverage purchased “through an exchange established by the state.”

Conservative scholars Jonathan Adler and Michael Cannon, who first touted the loophole in the law, have said it was intentionally written in order to coerce states into running their own marketplaces.

The federal government argued the language was merely a drafting error, which could easily be fixed if not for the polarized state of Congress, which has made it nearly impossible to make any legislative fixes to the law.

The government maintained that other aspects of the law makes clear Congress intended to provide the tax credits in all states.

AFP Photo/Jewel Samad

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TOP CEOs Downgrade Economic Growth Forecasts, Expect To Spend Less

TOP CEOs Downgrade Economic Growth Forecasts, Expect To Spend Less

By Jim Puzzanghera, Los Angeles Times

WASHINGTON — Top U.S. chief executives slightly downgraded their economic growth forecast, according to a survey released Tuesday, and fewer said they expected to increase investments in their businesses amid uncertainty over whether Congress will reinstate some key corporate tax provisions.

Despite those concerns, the second-quarter economic outlook index from the Business Roundtable rose to 95.4 from 92.1 in the first three months of the year, the trade group said.

The index rose because of improvement in CEO expectations for increased sales and hiring in the next six months.

But AT&T Inc. Chief Executive Randall Stephenson, who chairs the organization, said a drop in the percentage of business leaders expecting to increase their capital spending was a major concern.

The decline was driven by the December 31 expiration of some temporary tax provisions, such as a 50 percent bonus on depreciation write-downs and a tax credit for research and development costs.

Congress is expected to extend those measures retroactively, but has not acted yet.

After the economy contracted in the first quarter, CEOs reduced their forecast for annual growth this year to 2.3 percent from 2.4 percent in the previous survey.

The downgrade came after the International Monetary Fund on Monday reduced its U.S. growth projection to 2 percent this year from an April forecast of 2.8 percent.

“CEO expectations for both investment and growth remain well below the potential of the U.S. economy and below what we should be experiencing at this stage of a recovery,” Stephenson said.

He called on Congress to extend the expired corporate tax provisions to remove uncertainty.

“It’s really unclear to the business community when those extenders or if those extenders will get passed, and that’s what I think you’re seeing manifesting itself in this greater pessimism about investment,” Stephenson said.

Photo: Tax Credits via Flickr

House Republicans Vote To Reverse Billions In Deficit Savings

House Republicans Vote To Reverse Billions In Deficit Savings

On Wednesday, the House — by a vote of 230-188 — passed one of the six “tax extenders” bills recently approved by the Ways and Means Committee.

The measure, which accounts specifically for research and experimentation tax credit, could have served as a rare example of bipartisanship: both Republicans and Democrats support the broad ideas of an extension and expansion of the research and experimentation credit. But the bill’s actual provisions — or lack thereof — are the source of Democrats’ and President Obama’s opposition to the bill.

As a Center on Budget and Policy Priorities report explains, the GOP-backed bill permanently extends the research and experimentation tax credit, but does offset its cost by closing any loopholes within the current tax code. Thus, the extension and expansion of the credit greatly add to the deficit.

Closing tax loopholes, however, could offset the costs of the six tax extenders: $151 billion for research and experimentation credit; $301 billion for all six Ways and Means bills; and $560 billion for a permanent extension of all tax credits. Not offsetting the costs of extensions means that ultimately 75 percent of the $770 billion in revenue raised by the 2012 “fiscal cliff” deal would be reversed.

CBPP

Additionally, CBPP points out that the bill “violates budget enforcement rules,” like the 2013 Murray-Ryan resolution that requires lawmakers to “pay for any tax extenders that they continue or for any new tax cuts.” Adding to deficits is a clear contradiction of this provision and would hinder the resolution’s more specific measures that aim to balance the budget by 2024.

The White House has criticized the flawed bill, with the Office of Management and Budget reiterating that the president supports a permanent research and experimentation credit extension, but only if it follows or is joined by an elimination of sevearl loopholes found in the tax code.

“Making traditional tax extenders permanent without offset represents the wrong approach,” the Office of Management and Budget said in a statement.

The White House further threatened that President Obama would veto the bill in its current form — not that the bill is expected to pass the Senate.

Democrats are standing behind the president, calling out Republicans for their hypocritical position on deficits when it benefits their political agenda.

“This takes no courage to put on the floor or to vote for. None. Zip. Tax cuts are easy to vote for. Paying for what you buy is difficult to vote for,” said House Minority Whip Steny Hoyer (D-MD). “And all the wringing of hands and gnashing of teeth with reference to the deficit seems to go by the boards when the Republicans talk of tax cuts.”

The CBPP notes Democrats’ concerns in its report, saying that the tax extenders would “constitute a fiscal double standard” by contrasting “sharply with congressional demands to pay for other budget priorities.” Also, the research and development tax credit — claimed by some of the nation’s largest businesses and corporations — represents budget priorities that are “cherry picked” in ways that mirror heavy lobbying efforts. This explains why other budget priorities and credits — like emergency federal unemployment insurance, or the Child Tax Credit, both which benefit low-income families instead of big corporations — are either completely rejected, or put on the back burner by the GOP.

Those other budget priorities are often met with the typical Republican Party talking points. This usually means that any measure somehow related to the economy and government spending is met with a firm “no” from conservatives who say the measures add to the deficit, and criticize Democrats for seemingly ignoring deficit savings. In fact, the fear of increasing the deficit has served as the GOP’s argument against extending emergency federal unemployment insurance in recent months, as many on the right accuse Democrats of not providing a deficit-friendly way to pay for the benefits’ costs.

Still, Republicans argue that the legislation, as passed on Wednesday, offers domestic businesses and corporations an advantage over foreign competition, which overrides their concern for deficit reduction.

“It is allowing businesses who invest to keep more of that investment, to plow it back into research,” argues House Majority Leader Eric Cantor (R-VA).

The White House acknowledges the tax credit bills could “strengthen the economy and help middle-class families,” but still insists on a more fiscally responsible measure.

Photo: Gage Skidmore via Flickr

Chart via Center on Budget and Policy Priorities

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