Dem
47
GOP
53
The extension of the 2017 tax cuts was a gift to big corporations and the ultrawealthy, but no matter how much they get, it is never enough for them. So the Trump administration is working on more "tax cuts," but doing it under the radar so it doesn't get too much publicity, especially with all the stories about hungry SNAPless children floating around.
Rather than pass a law making the tax breaks explicit, the method chosen is to weaken a 2022 law that Joe Biden signed. A provision of that law, the Inflation Reduction Act, created a 15% Corporate Alternative Minimum Tax (CAMT) for the very largest corporations. Corporate taxation is very complicated because publicly traded companies want to show large profits to the shareholders but small profits to IRS. The former, book income, is governed by the Generally Accepted Accounting Principles (GAAP). The latter, taxable income, is governed by the Internal Revenue Code. Corporate tax lawyers are paid a lot of money to exploit the differences between the two so the company can show a large profit to the shareholders and little or no profit to the IRS. If you want to get into this stuff in more detail, but still in highly readable form, here is a good tutorial.
Very briefly, the CAMT starts with gross receipts and limits which deductions can be used to reduce tax liability (but allows them for business purposes). One area it addresses is how fast equipment can be depreciated. Another is international transactions. A favorite trick of manufacturing and tech-heavy companies is to set up a subsidiary in a low-tax country like Panama or the Cayman Islands and transfer patents to the subsidiary. Then the subsidiary charges the mother company in the U.S. an arm and a leg for use of the patents. The enormous royalty payments (for using their own patents) causes profits in the U.S. to go down and profits in the subsidiary to go up—but the tax rate there is low, which is why the subsidiary was placed there in the first place. The CAMT addresses this type of international shenanigans.
The CAMT doesn't get into the weeds on everything. Some of its power is due to Treasury regulations. What the administration is doing is changing these regulations to give breaks to giant private equity firms, crypto companies, foreign real estate investors, insurance companies, and certain other multinational corporations. What are the requirements for getting a break? There aren't any formal ones, but tossing a few tens of millions into the pot to help Trump keep his balls close to home is a plus. Got the picture? The CAMT was originally expected to bring in $222 billion over 10 years, but with the new and proposed regulations, most of that will be wiped out. It is effectively a $222 billion tax cut for very large corporations, even though Congress is out of the loop on this, despite its so-called power of the purse.
Not everyone likes this, not even conservatives. Kyle Pomerleau, a senior fellow and tax expert at the right-leaning American Enterprise Institute, said: "Treasury has clearly been enacting unlegislated tax cuts. Congress determines tax law. Treasury undermines this constitutional principle when it asserts more authority over the structure of the tax code than Congress provides it."
The administration is also busy dismantling regulations that shut down some extremely aggressive tax shelters used by oil companies and AT&T to save something like $100 billion. To make sure IRS doesn't put them back, the administration has suspended top officials who oversee taxation of large multinationals—for example, Holly Paz, an experienced professional who understands how these shelters work.
From Donald Trump's point of view, changing the regulations allows pinpointed tax breaks for specific Favored Companies without giving them to disfavored companies in the same business that are not using a particular tax shelter. This provides companies incentives to become Favored Companies. Fortunately for them, there are many ways to become a Favored Company, some of them involving tangibles (his balls) and some intangibles (his crypto). It's a good deal for some folks. (V)