November 09, 2023

At Hearing, Warren Calls for End of Trump Tax Cuts for Giant Corporations

 “Extending corporate tax breaks is really good for massive corporations, but it's also really bad for the American people. We should not be rubber-stamping Trump tax cuts for giant businesses.” 

Hearing Exchange (YouTube)

Washington, D.C. – At a hearing of the Senate Finance Committee, U.S. Senator Elizabeth Warren (D-Mass.) called out efforts by lobbyists for giant corporations trying to extend three of the biggest corporate giveaways in the Trump tax cuts: bonus depreciation, R&D expensing, and looser limits on net interest deduction. 

In questioning with Chye-Ching Huang, the Executive Director of New York University Law School’s Tax Law Center, Senator Warren unpacked how corporations use accounting gimmicks to understate the cost of these tax breaks. Additionally, Senator Warren debunked the myth that these companies used their tax breaks to make new investments when in fact, they used their extra cash to spend trillions on stock buybacks and dividends. Senator Warren also highlighted how bonus depreciation—which allows businesses to deduct the full cost of their investments in the year that they make them—often benefits the biggest corporations. 

Senator Warren called for Congress to stop rubber-stamping tax breaks like these for giant corporations and the ultra-wealthy and to end these Trump tax giveaways. 

Hearing: Examining How the Tax Code Affects High-Income Individuals and Tax Planning Strategies
U.S. Senate Committee on Finance
Thursday, November 9, 2023

Senator Elizabeth Warren: So in 2017, the Republicans in Congress passed one of the biggest tax giveaways to millionaires and giant corporations in recent memory. The Trump tax cuts kicked working families to the curb, while it added about $2 trillion to the national debt, all so that Republicans could give a massive handout to their wealthy pals and donors. 

But the $2 trillion price tag on this doesn't actually tell the full story. That's because some of the corporate tax breaks had expiration dates. Now expiration dates, not because they actually wanted those tax breaks to expire, but expiration dates because that meant they could represent that the total cost of the giveaways would look smaller than they really were. 

Corporate lobbyists went along with this because they knew that when the tax breaks expired, Congress could be counted on to renew them endlessly. Now, three of the biggest giveaways are starting to expire, and the corporate lobbyists around here are working overtime to get them extended.

Ms. Huang, corporate lobbyists claimed that these three giant giveaways, known as bonus depreciation, R&D expensing, and the net interest deduction, were really important, because they would spur American investment. So now we have some data on how these corporate tax giveaways work. Does the data show that companies have used their tax breaks to make new investments?

Chye-Ching Huang, Director, Tax Law Center, New York University School of Law: So the corporate tax cuts in 2017 were even bigger than what companies asked for. And what we saw was trillions going into buybacks and dividends. Economy-wide investment and jobs didn't grow any faster than they had before the law. And careful economic analysis has failed to find anything near what was promised. 

And now as you're saying, there's talk about adding to that retroactive business tax breaks, which would be just a complete wasteful giveaway. You can't change past investments or wages by giving away tax cuts.

Senator Warren: So, take bonus depreciation as an example here. Under normal tax rules, businesses are allowed to deduct expenses from their income so they aren't taxed for the losses that they take. Because certain assets lose value over time, like machines or buildings, businesses can typically deduct the cost of that depreciation over the life of the asset. 

But bonus depreciation takes this logic and turns it upside down. Instead of taking a chunk of the depreciation each year that the asset has value, say a new set of delivery trucks, bonus depreciation lets businesses deduct the entire cost of those delivery trucks in the year that they buy them. Ms. Huang, why do businesses benefit so much from bonus deductions, bonus depreciation?

Ms. Huang: So like a lot of business tax breaks, a company needs to actually be pretty big and highly profitable to take full advantage of it. You hear a lot of rhetoric about small and startup businesses, but they often can't actually even access these provisions because they don't have enough profits to offset them against. And the research shows that the biggest companies that are getting the bulk of the tax break are the least likely to actually increase investment or wages. 

Senator Warren: Okay, so the tax breaks are not used to increase investment. And in fact, these tax breaks, business tax breaks, are going to the very richest corporations. And now like they did in 2017, and like they've done so many times before, corporate lobbyists are asking for a temporary extension of these tax breaks, to make them look cheaper than they actually are. But they have every intention of pushing Congress to extend these tax cuts again and again and again, so their wealthy clients will never actually have to pay the bill.

Ms. Huang, if we look at the true cost of extending these three corporate giveaways that's being championed by lobbyists, and not made-up versions that are being peddled by the corporate lobbyists, what would those figures look like? 

Ms. Huang: The sticker price here is quite misleading, because the true cost is much larger. The official costs of temporary full expensing would be 3 billion through 2025. But if you were to make it permanent, it would be $325 billion. 

Senator Warren: Woah, the difference between 3 billion and say that second number again? 

Ms. Huang: 325.

Senator Warren: 325. So, the nominal cost of this, the representative cost of this is about 1% of what you say it would really cost? 

You know, look, I get it, extending corporate tax breaks is really good for massive corporations, but it's also really bad for the American people. We should not be rubber-stamping Trump tax cuts for giant businesses. While Republicans play political games, Democrats should be doing everything in our power to make sure that millionaires, billionaires, and giant corporations are paying their fair share. 

Thank you, Mr. Chairman.