Chamber Letter on Tax Relief Act of 2005
November 16, 2005
The Honorable Daniel Akaka
United States Senate
Washington, DC 20510
Dear Senator Akaka:
On behalf of the U.S. Chamber of Commerce, the world's largest business federation representing more that three million businesses and organizations of every size, sector, and region, I write to express our opposition to various provisions included and other provisions that were not included in the Tax Relief Act of 2005. While we applaud the Senate for its efforts to reduce the rate of growth in mandatory spending programs, we are deeply concerned that this fiscal discipline is not being matched with sound economic and tax policy.
The Chamber does support a number of the tax cuts and extensions that were included. Provisions like the extension of the R&E tax credit, the Work Opportunity and Welfare-to-Work tax credit, an increase in the exemption threshold under the AMT and a deduction for state and local sales taxes are all designed to spur economic growth and job creation. In addition, the Chamber supports the Katrina related provisions targeted to promote economic recovery in the devastated Gulf Coast region.
However, the Chamber firmly believes that the extension of the dividend and capital gains tax rate cap of 15% and the active financial services income earned abroad rules must be included in the package. The capital markets, investors, and the corporate community need a predictable tax code. Moreover, these tax cuts are largely responsible for the economic growth and job creation the U.S. economy has enjoyed over the last several years. By failing to extend these tax provisions, the Congress would be sending the wrong message to business and investors.
The Chamber opposes a number of tax increases that are included in the tax package. Provisions that would provide for the disallowance of tax deductions for certain fines and penalties, deny the deduction of punitive damages, codify the economic substance doctrine, and restrict corporate inversions, would unnecessarily penalize businesses and run counter to the promotion of economic growth and job creation.
Even more astounding is the accounting change that would limit the use of LIFO. This change discriminately targets one industry. The practice of using LIFO is a generally accepted accounting method that has been used for decades to track inventory, as it better matches costs with revenues. Imposing this accounting change, which solely targets the oil industry, amounts to nothing more than a back door windfall profit tax.
The commendable attempts by the Senate to exercise fiscal discipline should not be undone by the passage of flawed tax policy. Because of the inclusion of tax increases combined with the failure to extend important tax cuts, the Chamber cannot support the package. We look forward to working with the Congress during the budget reconciliation conference to ensure the adoption of congruent policies that demonstrate both fiscal restraint and a commitment to economic growth and job creation.
R. Bruce Josten
Executive Vice President, Government Affairs
U.S. Chamber of Commerce