The American Jobs Creation Act of 2004 provides huge corporate tax cuts. The impetus for the bill was the need to rescind a $5 billion-a-year tax subsidy to American exporters that had been declared illegal by the World Trade Organization. To make up for the lost subsidy, the Act provides $137 billion in new tax cuts over the next ten years. Most of the windfall goes to major corporations. Among its many provisions, the Act cuts the top tax rate for U.S. manufacturers and changes the definition of “manufacturing” so that it applies to a host of new industries, from architects to coffee roasters. The Act provides a tax holiday to multinational corporations: they will be taxed at only 17 percent of the normal rate if they bring foreign profits back into the United States. Beyond these broad provisions, the Act also directs a host of tax cuts aimed at particular industries and individual companies. There are tax subsidies for tobacco farmers, a manufacturer of fishing tackle boxes, NASCAR-track owners and companies that import ceiling fans from China, just to name a few. The Act also provides a temporary personal income tax cut to people in states with no state income tax by allowing them to deduct their state sales tax instead. The bill appears revenue-neutral (it doesn’t increase the deficit) on paper, but economists suggest that this is primarily an accounting gimmick that masks nearly $80 billion that the bill would add to the deficit over the next ten years.
The Middle-Class Position:
The Middle Class Opposes: This legislation is portrayed as a job creation measure, but there is nothing in the 650-page law to assure or even encourage the creation of a single job. Instead, the bill is a massive tax giveaway to a series of closely-tailored special interests with serious consequences for the federal deficit and middle-class priorities. While repealing the tax subsidy banned by the World Trade Organization was an important step to prevent Europe from imposing trade sanctions on American exports, that measure provides little justification for the tremendous size of the new tax benefits littered throughout this bill. The bill will provide a tax cut to middle-class people in states with no income tax. But this benefit is minor compared to what could have been done with the huge amounts of revenue the government will forgo as a result of this pork-barrel bill. The money could have been used to fund middle-class priorities such as increased college aid, extended unemployment benefits or assistance to small businesses in providing health care for their employees. All of these would have improved the nation’s fiscal health, as well as bolstered the middle class. Instead this bill prioritizes massive tax cuts for the most profitable American corporations.
From the Experts:
“The worst example of the influence of the special interests I have ever seen.” —Senator John McCain (October 2004)
“This bill exemplifies again the misplaced priorities of our national leaders. For less than the cost of these tax breaks, Congress could have provided Head Start for every eligible child or insured every uninsured child in America for the next decade.” —Marian Wright Edelman, President, Childrens Defense Fund (June 17, 2004)
“Business elites provide politicians with the money they need to run for office. The politicians pay them back with a return on their investment so generous it boggles the mind. That legislation enacted this week is worth $137 billion in tax cuts for corporations.” —Bill Moyers (October 15, 2004)
Beyond this Bill:
The new corporate tax law can claim not to increase the deficit only because of the way its provisions are phased in and sunset at different times. Legislators concerned about fiscal responsibility and interested in prioritizing the needs of middle-class Americans rather than corporate special interests should resist any effort to extend the expiring tax provisions of this Act.
Number of jobs the American Jobs Creation Act requires companies that get tax benefits to create: 0
Minimum tax cut General Electric will receive over the next ten years as a result of the Act: $8 billion
Tax break for manufacturers of archery products under the Act: $9 million
Amount the tax breaks in the Act would add to the deficit in the next ten years if they are extended: $80 billion
Value of the illegal corporate tax subsidy the Act was intended to repeal: $5 billion
Value of new corporate tax subsidies the Act provides: $137 billion
Search our analyses of legislation
significant to America’s current and
aspiring middle class, and find out
how members of Congress voted on
those bills.
