Do Something! Anything! Don’t Read It Just Pass It!
The hurried legislation adopted by a Congress voting under the threat of sudden global economic collapse led to hidden tax breaks for firms in dozens of industries. They included builders of Nascar auto-racing tracks, restaurant chains such as Burger King Holdings Inc., movie and television producers — and London’s Diageo.
“It’s kind of like the magician’s sleight of hand,” says former House Ways and Means Committee Chairman William Thomas, a California Republican who ran the committee from 2001 to 2007 and oversaw all tax legislation. “They snuck these things in a bill that was focused on other things.”
Congress inserted the tax benefits for companies other than banks in a fog of confusion and panic after the House of Representatives rejected the first attempt to fund the bank support effort urged by then President George W. Bush and Treasury Secretary Henry Paulson.
Lawmakers rubber-stamped the package of arcane, if innocuous-sounding, tax items with one eye on the calendar. An election was only a few weeks away, and legislators were desperate to return home to campaign for their own re-election.
A year later, lawmakers and the public are just now discovering some of the curious subsidies tucked into TARP and the government’s other massive intervention programs. Four months after TARP took effect, President Barack Obama pushed through a $787 billion bill intended to pump up the nation’s economy.
“You had this remarkable brief period with no transparency, filled with backroom deals being made and an absolute blackout of information,” says Jim Lucier, a senior political analyst at Capital Alpha Partners LLC, a Washington firm that tracks legislation for hedge funds and institutional investors.
Referring to TARP tax breaks, he says, “It’s ridiculous and it’s a product of the legislative sausage-making machine.”
Baucus didn’t know until months later, Sullivan says, that one of those added provisions would steer about $2.7 billion to Diageo over the next three decades. That’s because Diageo wasn’t even mentioned in the bill and lawmakers didn’t realize they were ratifying deJongh’s deal by extending the underlying tax policy that made the agreement possible in the first place.
One, championed by Michigan Representative Dave Camp, the top Republican on the tax-writing House Ways and Means Committee, and supported by Baucus, is saving Nascar track builders $109 million in taxes this year by allowing more generous write-offs.
It also effectively cements a $33 million break for companies that invest in American Samoa. That benefit had been targeted at tuna canners such as Del Monte Foods Co., which owned the StarKist tuna brand until Seoul, South Korea-based Dongwon Group bought it in June 2008. Del Monte is based in House Speaker Nancy Pelosi’s San Francisco district.
Matt Welch writes,
Remember this, the next time some politician or editorial board talks of “the cost of doing nothing” (which will be today, tomorrow, and every day that Congress debates health care and climate change). This list above, multiplied a thousand times, is the routine and utterly predictable cost of doing something. Politically connected industries and companies will be given micro-targeted tax breaks and subsidies, while the rest of us shlubs will not only pay for them, we’ll get an earful of sanctimony from the Washington Post, David Brooks, and even the Wall Street Journal editorial board, especially those who have the nerve to say “Hold on a sec.”
This is quite right. And health care will make this look like chump change. The idea that Obama and his Administration are different is just simply not true. This is how things have been done in Washington D.C. for decades, and it is how things will continue to be done. Each and every one of these big sweeping proposals President Obama wants to enact will likely carry the same problems with it.