Tax Expenditure of the Week: Offshore Tax Deferral. SOURCE: iStockphoto Offshore deferral encourages companies to use accounting techniques to record profits offshore, even if they keep actual investment and jobs in the United States. This explains why U.S. corporations report their largest profits in low-tax countries like Luxembourg, pictured above, though clearly that is not where most real economic activity occurs. By Seth Hanlon | March 16, 2011 This is part of a new CAP series called the “Tax Expenditure of the Week.” The series aims to explain the often-confusing constellation of tax breaks in a way the average citizen can understand. Subjecting these dozens of tax breaks to greater scrutiny is part of our broader focus on making government work better and achieving better results for the American people, which is the goal of CAP’s “Doing What Works” project.
This week we’re looking at the feature of the tax code that allows U.S. corporations to defer paying taxes on their offshore profits. What is offshore “deferral”? Endnotes [1]. It's Easy Being Green: Does Daylight Saving Time Work? SOURCE: AP/Elise Amendola Electric Time Co. employee Walter Rodriguez cleans the face of an 84-inch Wegman clock at the plant. March 16, 2011 Read more articles from the "It’s Easy Being Green" series Léalo en español Most Americans woke up a little bit groggier this past Sunday. The interval for DST has been longer in the past four years. Why the switch? Ben Franklin was one of the first to propose something along the lines of DST.
Franklin’s tongue-in-cheek plan never caught on, predictably enough. The United States passed a law in 1918 that both established time zones and instituted a DST similar to what we have now. President Franklin Delano Roosevelt later reinstated a year-round DST during World War II to curb wartime energy consumption. Finally, in 1966, a more standardized DST was implemented that coincided with the Universal Time Act. The logic behind DST is rather intuitive. No clear consensus has emerged from studies despite the historical assertion that DST saves energy. Reality Slowly Dawns on House Republicans.
SOURCE: AP/Manuel Balce Ceneta Up until last week, it looked like the Tea Party caucus would exert its power once again and demand that House Speaker John Boehner (R-OH) shut down the government, but cooler heads may prevail today after the House leadership on Friday offered a two-week reprieve so that more negotiations could ensue. By Michael Linden | March 1, 2011 Later today House Republicans will hopefully take another half-step forward in their continuing budget dance that we at the Center for American Progress call the Tango con Realidad. Out on the campaign trail, it is easy for conservatives to call for “cutting spending” and “shrinking government.” But the stark reality is that getting our nation’s federal budget deficit under control is actually going to require more than simply hacking away blindly at fundamental public services.
The two-week resolution before the House does include $4 billion in cuts, which is a rather large amount for such a short time frame. Idea of the Day: Gingrich's Republican Congress Not Responsible for 1998 Budget Surplus. March 8, 2011 When Bill Clinton took office in January 1993, the federal budget deficit was projected to be $310 billion that year, or about 5 percent of GDP. The Congressional Budget Office was also projecting that five years later, in 1998, the federal budget would still be in the red to the tune of $357 billion, or 4.5 percent of GDP.
At the time, the CBO called the deficit outlook, “grim.” Five years later, the United States enjoyed its first federal budget surplus in nearly 30 years—an incredible turnaround given the bleak projections at the beginning of the Clinton administration. There are, indeed, two main heroes in the story of the remarkable budget surplus of 1998, but neither of them are Newt Gingrich or his Republican Congress. For more on this topic please see: Not So Fast, Newt by Michael Linden To speak with our experts on this topic, please contact: Learning About Politics: Does Social Security Really Need Fixing? In a recent Op-ed for USA Today, Office of Management and Budget Director Jacob Lew argued that “Social Security isn't the problem.” Social Security isn't running a deficit, according to Lew because the Social Security “trust fund” will make up the difference between the revenue generated by Social Security taxes (FICA) and the amount Social Security pays in benefits for the next 26 years.
Other Democrats have also made similar claims. Harry Reid, Chuck Schumer, and Richard Durbin have all recently claimed that Social Security does not add to the deficit (see FactCheck.org). Also, former Clinton Labor Secretary Robert Reich recently wrote, “Now that Social Security has started to pay out more than it takes in, Social Security can simply collect what the rest of the government owes it.
Until last year, Social Security had been running surpluses. There is a major flaw, however, in this logic. When Social Security cashes in those bonds, the revenue has to come from the federal government. Idea of the Day: Gainful Employment Rule Doesn't Preclude Other Necessary Regulations. February 24, 2011 Politicians love false dichotomies. Remember “You’re either part of the solution or part of the problem” and “Either you are with us, or you are with the terrorists”?
Positioning two nonexclusive alternatives as an either-or situation is a cheap rhetorical trick, but when House members used it to prevent the Department of Education from implementing a regulation on career education programs, it became very expensive—for taxpayers and for students. The House of Representatives last week passed an amendment that would prevent the Department of Education from implementing a regulation called “gainful employment.”
These arguments imply that allowing the Department of Education to implement its regulation on career education programs would be at odds with the continuing operation of for-profit colleges, or studying the regulation’s effects, or regulating the rest of higher education. For more on this topic please see: Ensuring Gainful Employment by Julie Margetta Morgan. Idea of the Day: Rising Military Health Care Costs May Harm National Security. February 28, 2011 Military health care costs “are eating the Department of Defense alive,” according to Defense Secretary Robert Gates. The Defense Department’s fiscal year 2012 budget request includes $52.5 billion for the Tricare military medical insurance program, a 300 percent increase over its fiscal year 2001 budget. As a result of this unprecedented cost growth in the Tricare system, nearly 10 percent of the baseline defense budget now goes to providing medical care for active duty, reserve, and National Guard troops and their dependents, as well as military retirees of all ages and their dependents.
These skyrocketing health care costs will consume an increasingly large portion of the defense budget as the federal deficit forces the country to slow down projected increases in defense spending. The cost of military health care could eventually begin to divert funding away from other crucial national security initiatives. For more on this topic please see: Idea of the Day: Educating Workers Is Crucial for America's Success in the Global Innovation Economy. March 10, 2011 Public, business, education, and labor leaders are on the frontlines of the nation’s economic revival.
Public policies come together with business strategies and workers’ knowledge, skills, and abilities at the state and regional level to encourage business growth, create jobs, and educate workers. The last of these three areas, educating workers, may be the most important investment we can make for America’s long-term success in the global innovation economy. No less an expert than Nobel Laureate economist Gary Becker has stated that “the stock of education, training, skills and even the health of people constitutes about 75% of the wealth of a modern economy.
Not diamonds, buildings or oil but things that we carry in our heads.” For more on this topic please see: Delivering Innovation Economy Skills While Wisely Using Public Funds by Louis Soares To speak with our experts on this topic, please contact: Not So Fast, Newt. SOURCE: AP/Cheryl Senter Gingrich and his Republican Congress had nothing at all to do with balancing the budget in 1998.
By Michael Linden | March 7, 2011 When Bill Clinton took office in January 1993, the federal budget deficit was projected to be $310 billion that year, or about 5 percent of GDP. The Congressional Budget Office was also projecting that five years later, in 1998, the federal budget would still be in the red to the tune of $357 billion, or 4.5 percent of GDP.
At the time, the CBO called the deficit outlook, “grim.” Five years later, the United States enjoyed its first federal budget surplus in nearly 30 years—an incredible turnaround given the bleak projections at the beginning of the Clinton administration. There are, indeed, two main heroes in the story of the remarkable budget surplus of 1998, but neither of them are Newt Gingrich or his Republican Congress. Take President Clinton’s 1993 budget bill—officially known as the Omnibus Budget Reconciliation Act of 1993. Idea of the Day: Cutting Spending in the Tax Code Can Help Deficit Reduction. March 21, 2011 Our nation needs jobs, a strong and competitive economy, and deficit reduction. The way to win that trifecta is not the House of Representatives’s continuing resolution for the remaining seven months of fiscal year 2011—a bill panned by a wide range of economists from across the political spectrum as a threat to economic recovery and a job destroyer.
And the way to get deficit reduction is not as the House-passed bill does, to initiate immediate cuts concentrated in one narrow area of the budget that funds the most critical investments for long-term economic growth. Instead, the focus should be on the waste found in the largest area of spending, an area of the budget larger than Social Security, Medicare, Medicaid, or national defense: the more than $1 trillion of tax-code spending hidden in the federal tax code. Yet the federal government treats tax-code spending very differently than it does direct spending. For more on this topic please see: Drilling Down on Fracking Concerns.
SOURCE: AP/Ralph Wilson A Chesapeake Energy natural gas well site is seen near Burlington, Pennsylvania. By Tom Kenworthy, Daniel J. Weiss, Lisbeth Kaufman, and Christina C. DiPasquale | March 21, 2011 Download this brief (pdf) A widely used oil-and-gas drilling technique, hydraulic fracturing, is spreading rapidly to develop vast reserves of natural gas trapped in deep underground shale formations.
Hydraulic fracking, however, is coming under more rigorous oversight by the press and state and federal agencies because of its contribution to air and water pollution. This issue brief explores the ecological and economic issues of “fracking,” as it is increasingly coming to be known in the areas of the country where natural gas is tapped due to the technology. What is fracking and what does it do and cause?
No more. Concerns about this technique led late last year to a partial moratorium in New York state on new drilling permits that allow fracking. Lessons from Pennsylvania.