05.01.2013

Fiscal Cliff Deal Brings Business Big Benefits Even As Execs Carp

In the wake of this week's last-minute deal to avoid the so-called fiscal cliff, executives at some of the nation's largest corporations have denounced the compromise, arguing that it does little to solve the nation's long-term debt woes."It's a missed opportunity to revive our economy," said Honeywell International chief executive David Cote, one of the leading corporate voices urging a congressional accord, in a statement Wednesday."I think it's a joke," said Dick Kovacevich, former chief executive and chairman emeritus of Wells Fargo.Yet many of the same executives calling for federal spending cuts and comprehensive tax reform are benefiting from billions of dollars in tax exemptions and carve-outs provided to major corporations. Executives who have banded together in recent months as part of the Campaign to Fix the Debt, a coalition of current and former politicians and business leaders, have at the same time been lobbying to preserve the tax perks their companies have enjoyed for years."They're rather hypocritical about their 'shared sacrifice,'" said Robert McIntyre, director of the progressive group Citizens for Tax Justice. "It's shared by anyone but them."Honeywell's Cote said any real debt proposal needs to include "meaningful entitlement and tax reform." He urged leaders in Congress to "put politics aside and work out a plan that will truly help to expand the U.S. economy over the long term."Over the past two years, industrial conglomerate Honeywell International has spent more than $14 million lobbying in Washington, including on "international taxation and repatriation." Many multinational corporations, including those whose executives have come together as part of the Campaign to Fix the Debt, enjoy a benefit that allows them to indefinitely put off paying U.S. taxes on interest income earned overseas. They have lobbied for more than 15 years to preserve the so-called active-financing exemption, and Congress has repeatedly extended it.This year was no exception. The active-financing exemption was one of the corporate tax benefits included in the fiscal cliff deal earlier this week. The exemption for overseas investment income is estimated to cost more than $11 billion over the next two years, according to the Joint Committee on Taxation.From 2008 to 2010, Honeywell paid an effective federal tax rate of minus 0.7 percent, according to an analysis from Citizens for Tax Justice and the Institute for Taxation and Economic Policy. A Honeywell spokesman did not respond to questions about corporate tax exemptions.General Electric, also part of the Fix the Debt coalition, has relied extensively on the overseas investment exemption through the years -- a factor that contributed to its famously low federal tax rate in 2010, the subject of a New York Times investigation. The exemption is important enough that G.E. identifies failure to extend the benefit as a "risk factor" in its annual securities filings. The company told investors that its tax rate would "increase significantly" if the exemption weren't extended by Congress.A spokesman for G.E., Seth Martin, wrote in an e-mail that the company's tax rate was low in 2010 because of losses in its finance wing during the economic crisis, but that rates have since increased. In the company's most recent annual filing, G.E. said its tax rate was minus 11.6 percent in 2009, 7.3 percent in 2010 and 28.5 percent in 2011. Those rates reflect income taxes paid in all countries, not just the United States.Martin said G.E. supports comprehensive tax reform, including lowering corporate tax rates but also closing loopholes, "even if it means higher taxes for companies like G.E." He said reforms would encourage domestic economic growth and encourage U.S. multinational companies to invest overseas earnings at home.The chief executives of major banks with international investments, including JPMorgan Chase's Jamie Dimon and Morgan Stanley's James Gorman, publicly pushed for a sensible resolution to the fiscal cliff. In November, Gorman sent an email to employees, urging them to contact members of Congress. "No issue is more critical right now for the U.S. economy, the global financial markets and the financial well-being of our clients," he wrote.Morgan Stanley and JPMorgan have lobbied for extensions of overseas tax benefits in recent years. Representatives from both banks did not respond to requests for comment on Friday.Another corporate tax benefit included in the fiscal cliff deal is a provision known as bonus depreciation, which allows companies that invest in costly equipment to account for depreciation expenses much faster than they otherwise could. In other words, companies can deduct more in expenses now, lowering their taxable income.Congress has extended the provision each year since 2008 in an effort to spur business investment during the economic downturn. Bonus depreciation is expected to cost $35 billion this year, according to the Joint Committee on Taxation, and those costs are predicted to rise significantly if Congress keeps extending the benefit. Yet a Congressional Research Service report from September found that accelerated depreciation is a "relatively ineffective tool for stimulating the economy."Verizon Wireless Communications, another Fix the Debt member, has spent more than $30 million lobbying over the past two years. The company lists bonus depreciation as a lobbying priority, along with taxation on foreign earnings.A spokesman for the Campaign to Fix the Debt, Jon Romano, said the group is not making specific recommendations to the White House and Congress on how to structure a long-term deficit reduction plan. He did not say whether coalition members would be willing to give up corporate tax exemptions, but he said the group believes in "reining in spending, raising revenues and real entitlement reform.""They all understand that no deal is going to be perfect and that people are going to have to make sacrifices," Romano said. "They've all said they're willing to do that. Everybody is going to have to give something up to get a debt deal that's good for the country."

 

Obama warns Republicans on debt ceiling

US President Barack Obama on Saturday warned congressional Republicans against what he called a "dangerous game" with the country's economy as lawmakers prepared for a new battle over the national debt ceiling."As I said earlier this week, one thing I will not compromise over is whether or not Congress should pay the tab for a bill they've already racked up," the president said in his weekly radio and internet address."If Congress refuses to give the United States the ability to pay its bills on time, the consequences for the entire global economy could be catastrophic," he pointed out.Obama recalled that the US economy "suffered" and congressional Republicans clashed over national debt in 2011, a row that resulted in a downgrade of the US credit rating."Our families and our businesses cannot afford that dangerous game again," the president said.The United States reached its legal borrowing limit of $16.4 trillion on Monday. Now Congress has about two months to raise the debt ceiling to allow more government borrowing or risk causing the government to default on its bills and financial obligations.Demand for concessionsA bipartisan "fiscal cliff" deal passed by Congress later in the week did not address the debt ceiling issue.Republicans, who accepted this deal without any significant spending cut, are now demanding concessions on expenditures in return for allowing the ceiling to rise.House Speaker John Boehner has warned the Republicans will ask for "significant spending cuts" and reforms of expensive programmes like Social Security and Medicare that provide pensions and healthcare services for the nation's seniors.Obama said he was for spending cuts without shortchanging things like education, job training, research and technology."But spending cuts must be balanced with more reforms to our tax code," he said. "The wealthiest individuals and the biggest corporations shouldn't be able to take advantage of loopholes and deductions that aren't available to most Americans."

VP: Chavez could be sworn in by court

Venezuela's vice president said on Friday that President Hugo Chavez could be sworn in by the Supreme Court later on if he's not able to take the oath of office next week before lawmakers because of his struggle with cancer.Vice President Nicolas Maduro made the comment in a televised interview on Friday night, dismissing the argument by some opposition leaders that new elections must be called if Chavez doesn't take office as scheduled on Thursday.His stance appeared likely to generate friction between the government and opposition over the legality of putting off the swearing-in, which the constitution says should occur on Thursday before the National Assembly.Maduro says Chavez, as a re-elected president, remains in office beyond the inauguration date stipulated in the constitution, and could be sworn in if necessary before the Supreme Court at a date to be determined."The formality of his swearing-in can be resolved before the Supreme Court of Justice, at the time (the court) deems in coordination with the head of state, Commander Hugo Chavez," Maduro said.As for the opposition, Maduro said, "they should respect our constitution". The vice president held up a small copy of the constitution and read aloud passages relating to such procedures.Opposition leaders have demanded that the government provide more specific information about Chavez's condition, and say that if the president doesn't return to Venezuela by inauguration day, the president of the National Assembly should take over the presidency on an interim basis. But Maduro echoed other Chavez allies in suggesting the inauguration date is not a hard deadline, and that the president should be given more time to recover from his cancer surgery if needed."Maduro's comments are not surprising. The government holds all the cards in the current situation, particularly given the compassion for Chavez's serious illness. It has interpreted the constitution loosely, to its own political advantage," said Michael Shifter, president of the Inter-American Dialogue think tank in Washington. "In this way Maduro is able to buy some time, assert his authority, and rally support within Chavismo. He puts the opposition on notice and throws it off balance."As for Chavez, Maduro reiterated that the president is fighting a "complex" health battle but expressed hope that eventually "we'll see him and we'll hear him"."He has a right to rest and tranquillity, and to recuperate," Maduro said on state television, speaking with Information Minister Ernesto Villegas."The president right now is the exercising president. He has his government formed," Maduro said. He read a portion of the constitution detailing procedures for declaring an "absolute absence" of the president, which would trigger a new election within 30 days, and declared that "none of these grounds can be raised by the Venezuelan opposition."The Venezuelan Constitution says the presidential oath should be taken January 10 before the National Assembly. It also says that if the president is unable to be sworn in before the National Assembly, he may take the oath office before the Supreme Court, and some legal experts have noted that the sentence mentioning the court does not mention a date.Others disagree. Ruben Ortiz, a lawyer and opposition supporter, argued that Maduro is wrong and that under the constitution the inauguration date can't be postponed.If Chavez is not in Caracas to be sworn in on Thursday, Ortiz said in a phone interview, "the president of the National Assembly should take charge". He added that "there is a formal separation between one term and the other".But Shifter said the opposition is on the defensive, with its only tactic being to insist that Jan. 10 is the established date."Chavez controls all the key institutions, and it's doubtful that most Venezuelans will get too upset about defying what seems a fairly minor constitutional provision," Shifter said. "Attacking the government because it has no objection to the Supreme Court swearing in Chavez after Jan. 10 is not exactly a winning political strategy for the opposition."As for the government, he said it appears to be playing its cards for its purposes. "The government wants more time, whether to see if Chavez gets better, or to consolidate their ranks and further splinter and demoralize the opposition," Shifter said.Opposition 'will be defeated'Venezuelan lawmakers will meet on Saturday in a session that could shed more light on what steps Chavez's allies plan to take.Legislators will choose a president, two vice presidents and other leaders of the National Assembly, which is controlled by a pro-Chavez majority. Whoever is elected National Assembly president could eventually end up being the interim president of Venezuela under some circumstances.Brewing disagreements over how to handle a possible transition of power could be aired at the session, coming just five days before the scheduled inauguration day specified in the constitution."If the opposition thinks it will find a space in the National Assembly to conspire against the people, it's mistaken once again. It will be defeated," National Assembly President Diosdado Cabello said in a message on Twitter on Friday, saying the legislature will stand with Chavez.The government revealed this week that Chavez is fighting a severe lung infection and receiving treatment for "respiratory deficiency" more than three weeks after undergoing cancer surgery in Cuba.Chavez hasn't spoken publicly or been seen since his December 11 operation in Cuba, and the latest announcement suggests a deepening crisis for the 58-year-old president.But Maduro criticised rumours surrounding Chavez's condition, saying: "He has a right to his privacy, and to recover."The government's account of Chavez's complications raised the possibility that he might be breathing with the assistance of a machine. But the government did not address that question and didn't give details of the president's treatment.Potentially dangerous turnIndependent medical experts consulted by The Associated Press said the government's account indicated a potentially dangerous turn in Chavez's condition, but said it's unclear whether he is attached to a ventilator.Dr Gustavo Medrano, a lung specialist at the Centro Medico hospital in Caracas, said he has seen similar cases in cancer patients who have undergone surgery, and "in general it's very bad, above all after a surgery like the one they performed on him"."I don't know the magnitude of the infection he has, how much of his lungs have been compromised, how much other organs are being affected. That's not clear," Medrano said."What's most likely is that he's on mechanical ventilation," Medrano added. However, he said, while respiratory deficiency means there is an abnormally low concentration of oxygen in the blood, depending on the severity it can be treated in various ways.Dr Michael Pishvaian, an oncologist at Georgetown University's Lombardi Cancer Centre in Washington, agreed that such respiratory infections can run the gamut from "a mild infection requiring antibiotics and supplemental oxygen to life-threatening respiratory complications.""It could be a very ominous sign," Pishvaian said. He said it's possible Chavez could be on "life support," but added it's impossible to be sure without more details.Opposition leaders have blamed vague information coming from the government for the persistent rumours about Chavez's condition, and demanded a full medical report.Chavez has undergone four cancer-related surgeries since June 2011 for an undisclosed type of pelvic cancer. He also has undergone chemotherapy and radiation treatment.He was re-elected in October to another six-year term, and two months later announced that the cancer had returned. Chavez said before the operation that if his illness prevented him from remaining president, Maduro should be his party's candidate to replace him in a new election.'Information vacuum'The Venezuelan newspaper El Nacional criticised what it called an "information vacuum" in an editorial on Friday, saying Venezuelans are in the dark because "no one speaks clearly from the government". The newspaper called the situation reminiscent of secrecy that surrounded the deaths of Josef Stalin in the former Soviet Union and Mao Zedong in China.State television repeatedly played video of a song in which rappers encourage Venezuelans to pray, saying of Chavez: "You will live and triumph." A recording of a speech by Chavez appears during the song, saying: "I will be with you always!"This week, Cabello and the president's elder brother Adan joined a parade of visitors who saw Chavez in Havana.Brazil's state-run Agencia Brasil news agency reported Friday that President Dilma Rousseff's top international adviser, Marco Aurelio Garcia, also made a one-day visit to Cuba and spoke with Venezuelan and Cuban officials about Chavez's health. It was unclear if Garcia actually saw Chavez.