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Jobs bill leaves big business in limbo on tax breaks

Senate Democrats on Thursday are set to pass a jobs bill worth $26 billion to help states pay for teachers and Medicaid. It has some important ramifications here for big business, which is still waiting for Congress to renew some key tax breaks that have expired.

First, lawmakers are paying for this in part by limiting how much in foreign tax credits multinationals can claim. Typically firms get credits against U.S. income for taxes paid to foreign governments, and companies have become used to mixing and matching those credits against various sources of income to lower their tax bills. This jobs legislation doesn't end that entirely but it does make it harder -- extracting nearly $10 billion over the next ten years.

Secondly, by using this method of raising revenues now, the jobs bill leaves a big revenue hole in the tax extenders bill that's been in limbo now for months and includes research & development tax credits near and dear to tech and pharmaceutical companies. Lawmakers will have to find other ways to pay for the bill -- probably from the pockets of business again.

A Finance Committee aide told Company Beat Wednesday that Sen. Max Baucus (D-Mont.) is still committed to passing the tax extenders bill. But Baucus will first have to drum up other ways to pay for the tax breaks.

One prime candidate: private equity and venture capital partners who are already on the hook for a tax hike on their carried interest income, which is now taxed at the lower capital gains rate. For years critics have been pushing for all of that income to be treated as ordinary income. But in June, Democrats hammered out a compromise in which financiers would have some of their carried interest treated as ordinary income, some of it not -- a blended rate.

If lawmakers are now hard-up for revenues to pay for the tax breaks, they could take a look at that compromise again. Politically, they don't have much to lose going after a corner of Wall Street, although some moderate Democrats and Republicans have been fiercely defending the private equity industry on this. Lawmakers could also choose to raise taxes for the oil spill liability fund.

No matter what, tax lobbyists who say that they want comprehensive reform of the corporate tax code are going to have to wait longer. Looks as if lawmakers are going to chip away at the issue for the time being, piece by piece, bill by bill.

By Jia Lynn Yang  |  August 5, 2010; 11:15 AM ET
Categories:  Carried interest , Corporate taxes , Pharmaceuticals , Tech  
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Comments

Big business does not care about the working class people; they care about the amount of profit being deposited into there bank accounts. So, let them feel like the jobless and homeless American living on the streets because of their greed.

Posted by: sun52shine | August 5, 2010 2:03 PM | Report abuse

Like my granddaddy always said: "Figures lie and liars figure."

The administration is the best int the world at both.

Posted by: tonyjm | August 5, 2010 4:31 PM | Report abuse

Like my granddaddy always said: "Figures lie and liars figure."

The administration is the best int the world at both.

Posted by: tonyjm | August 5, 2010 4:31 PM | Report abuse

Posted by: tonyjm "Like my granddaddy always said: "Figures lie and liars figure. The administration is the best int the world at both."August 5, 2010 4:31 PM
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Curious to know how you would rate the previous administrations (2000 - 2008)? Best in the world? the administration doesn't pass laws and make legislation - that would be the U.S. Congress and the lobbyists of the world. Perhaps your statement is misdirected.

Posted by: Just_An_Observer | August 5, 2010 4:54 PM | Report abuse

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