A good prediction In early

A good prediction

In early September Max Zawicky (at the blog MaxSpeak, You Listen!) predicted:

"...We will soon be hearing that to help manufacturing, we must ease the tax burden on corporations...

"As we speak, Republicans in Congress are writing up more tax cuts, this time for corporations. They will sail under the flag of "fixing" the foreign sales corporations (FSC) loophole that has been found to be illegal by the World Trade Organization...

"...A small problem is that the FSC can't be fixed in a way that will be WTO-legal because the fault is in the basic structure of the corporate income tax. This dispute has been festering for decades. But not to worry, attached to the FSC fix will be all sorts of peripheral tax breaks that will survive, even as the FSC component remains in ever-lasting international legal limbo."

See "AND NOW FOR SOMETHING COMPLETELY SIMILAR". I noted it here: "What will the Bush Administration do to promote manufactures?", and I've been waiting to see what happened.

Friday's New York Times reports:

"The proposals are in the latest draft of a bill to replace a tax break for American exporters that the World Trade Organization has declared an illegal trade subsidy. The European Union has threatened to retaliate with up to $4 billion a year in tariffs on American products if the United States fails to repeal the old break...

"...In an attempt to placate as many groups as possible, the House proposal would repeal the original export tax break for what is known as extraterritorial income and replace it with a broader array of corporate tax breaks worth more than twice as much.

"Repealing the old tax break would bring the Treasury about $50 billion over 10 years, and the bill would raise nearly $30 billion more by blocking a variety of tax shelters and loopholes. But the new tax breaks would be worth about $142 billion over 10 years, leaving the net cost to the government at about $60 billion over the next decade."

See "House Leaders Are Pushing to Cut Corporate Taxes". I'm assuming the "illegal trade subsidy" in the Times story is Zawicky's "FSC."

P.S. 10-26-03 Steven Pearlstein had a column in the Washington Post on this corporate tax cut bill on Oct 22: " 'Reforming' The Corporate Income Tax".

"...Now Congress, under the guise of doing something to "save jobs" and "level the playing field" for the beleaguered manufacturing sector, is about to make things even worse [than they already are - just how bad is explained in preceding paragraphs - Ben]. You don't have to bother with the details of the various proposals. All you have to know is that we finally have a set of tax cuts so ill-conceived that even the Bush administration is against them..."

I learned about Pearlstein's column from Tyler Cowen at the Marginal Revolution blog: "Reforming the corporate income tax".