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Profitable corporations that will receive a total of $7.4 billion in immediate Alternative Minimum Tax (AMT) rebates if the economic “stimulus” bill recently passed by the House of Representatives becomes law are also major campaign contributors, giving $45.7 million to federal elections since 1991 , according to a new report released today by Citizens for Tax Justice (CTJ), the Institute on Taxation and Economic Policy (ITEP), and Public Campaign.
The 30-page investigative report, “Buy Now, Save Later: Campaign Contributions and Corporate Taxation,” shows how these companies and others use campaign money to manipulate the political process to win huge tax breaks unavailable to ordinary Americans — and how they have been doing so for years.
“While we place our right hand over our hearts, we should make sure our left hand is holding onto our wallets,” said Public Campaign executive director Nick Nyhart. “We all want to help our country remain unified and our economy strong. Giving corporate campaign donors everything that’s been on their tax wish list for decades, though, raises disturbing questions for all the ordinary Americans who can’t afford to contribute to campaigns, but who pay their fair share of taxes come April 15.”
The report examines 41 companies that contributed a total of $150 million to federal candidates and parties since 1991 while, between 1996 and 1998 alone, receiving $55 billion in special tax breaks. Several of these same companies are in line to be major beneficiaries if the AMT repeal in the recently passed House bill should become law.
These corporations make use of all the tricks of the political influence trade: cash contributions to federal candidates and political party committees through political action committees (PACs); individual contributions from executives and their families; and unlimited soft money contributions. They also hire high-ranking former members of Congress and congressional staffers who have gone through the revolving door to plead their cases on Capitol Hill and help raise cash for politicians. The corporations and their legions of lobbyists target campaign money to where it matters most — the members of the House Ways and Means and Senate Finance Committees.
The report includes five case studies showing how individual companies, and sometimes entire industries, have used campaign contributions to help establish, widen, and protect particular tax loopholes.
“For years we have tracked how corporations with household names, like General Electric and Microsoft, have been adept at avoiding paying their fair share of federal taxes,” said Bob McIntyre, executive director of CTJ and ITEP. “Now we have a record of how they have gotten away with it — by generously rewarding the politicians who write the tax laws.”
Major findings of the study include:
- Members of Congressional tax-writing committees — the House Ways and Means and Senate Finance Committees — collected $9.7 million from top tax- avoiding companies since 1991. The top recipients include Senate Finance Committee Members Sen. Orrin Hatch (R-UT), who received $355,430, and Sen. John B. Breaux (D-LA), who received $251,150.
- After the GOP took over Congress in 1994 — and control of writing tax laws — top tax-avoiding companies sharply increased their contributions to the Republican Party and its candidates. In the 1992 and 1994 election cycles, the GOP received 54 percent of the contributions from these companies while the Democrats received 45 percent. By the 2000 election cycle, Republican candidates and party committees received more than twice as much campaign cash as the Democrats. Thus, campaign cash followed the power to make laws the companies wanted — not any ideological preference or principle.
- Energy industries that will collect about $27 billion over ten years, if the energy bill passed by the House of Representatives in August 2001 becomes law, contributed $209 million to political campaigns from 1989 through June 2001. The oil and gas industry already pays the lowest effective tax rate of any industry in America — just 5.7 percent in 1998.
- The “Big Five” accounting firms, which beefed up their tax lobbying practices in the late 1990s and built a reputation for securing tax loopholes for corporate clients from Congress and the Treasury Department, are also major campaign contributors. They contributed $29 million to federal candidates and party committees from 1989 through June 2001.
- Microsoft Corp. led a successful campaign to extend the lucrative Foreign Sales Corporations (FSC) tax break, which gives credit to companies on profits earned from exports. Their month-by-month campaign contributions in 1997 peaked at $54,100 in July. That was the same month Congress approved the new law by inserting an 86-word provision that extended the FSC tax break to software companies into the massive budget reconciliation bill.
- Industries benefiting from a special tax credit for research and experimentation (R&E) costs poured $148 million into political campaigns and parties from 1989 through June 2001. The pharmaceutical and computer industries are pushing hard to make the R&E tax credit permanent. One of their major champions, Sen. Orrin Hatch (R-UT), received more than half a million dollars from these industries between 1995 and 2000. Five days after Hatch offered an amendment in committee in July 1999 to make the credit permanent, he received a bundle totaling $10,000 from a who’s-who list of top Pfizer executives.
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Public Campaign is a non-profit, non-partisan organization dedicated to sweeping reform that aims to reduce dramatically the influence of special interest money and big contributors on America's elections. Public Campaign is laying the foundation for reform by working with citizens organizations and other groups around the country that are fighting for comprehensive change. Together, we are building a network that includes participants from many states, creating a powerful national force for federal reform.
Public Campaign advocates for “Clean Money/Clean Elections” campaign finance systems, now the law in four states: Arizona, Maine, Massachusetts, and Vermont. Under Clean Money/Clean Elections systems, candidates who choose not to accept private contributions qualify for public financing for their election campaigns. At the federal level, Rep. John Tierney (D-MA) has introduced, H.R. 1637, the Clean Money, Clean Elections Act, and in the Senate, Sen. Paul Wellstone (D-MN) has introduced S. 719.
CTJ and ITEP focus on federal, state, and local tax policies and their impact upon our nation. Their joint studies of corporate tax avoidance have been widely cited for their key role in the enactment of the Tax Reform Act of 1986. Indeed, The Washington Post called their reports a “key turning point” in the tax reform debate that “had the effect of touching a spark to kindling” and “helped to raise public ire against corporate tax evaders.” The Wall Street Journal said that they “helped propel the tax-overhaul effort,” and the Associated Press reported that the studies “assured that something would be done . . . to make profitable companies pay their share.”
In 1996, ITEP completed work on its microsimulation tax model. The model is capable of calculating the impact of current tax law and tax change proposals on taxpayers by income level. It can also project potential revenue yields of tax law changes. The ITEP model is unique in its ability to produce analysis at the federal and state levels and to analyze income, consumption, and property based taxes.
 Public Campaign analyzed campaign finance data provided by the Center for Responsive Politics (CRP), www.crp.org, a non-partisan, non-profit research group based in Washington, D.C. that tracks money in politics. CRP downloads campaign finance records from the Federal Election Commission and codes them by company and industry.