Friday, August 10, 2007

Law and Sausages

The legislative process is always full of surprises. Otto von Bismark is credited with the quote, “To retain respect for sausages and laws, one must not watch them in the making." See (Just for laughs, you might also note the German phrase quoted in that article: "Alles hat ein Ende, nur die Wurst hat zwei" - German idiom meaning "everything will come to an end", literally translates as "everything has an end, only the sausage has two." Those Germans seem to love scatological humor. But I digress.)

In the latest Farm bill, Congress has managed to put in some extraneous provisions dealing with the tax rate on certain payments by U.S. subsidiaries of foreign corporations. Essentially, this provision would raise taxes on such firms. Republicans did not particularly want this foreign tax provision included in a farm bill, but proponents found justification for the means in the end they sought. As reported by Brett Ferguson in a story in the July 27, 2007 BNA Daily Tax report,
“Ways and Means Committee Chairman Charles Rangel (D-N.Y.) responded during the floor debate that he did not want to submit a tax provision for the bill, but was asked to do it so 26 million people would not lose their food stamps. Rangel said he also was asked to raise the needed money in a way that could be acceptable to members of both parties. "We weren't going to raise individual tax rates and we knew we couldn't raise corporate taxes, so I thought the common sense way was to find out who wasn't paying taxes and get the money from them," Rangel said.

Of course, presenting a false choice as the only alternative for an action can lead to bad outcomes. There are indeed other ways to pay for food stamps without raising taxes. Look for the President to veto this bill. Senator Grassley (R-Iowa has indicated that he would support such a veto due to these tax provisions. (See BNA DTR 08/09/07).

Another provision in the farm bill, which was successfully defeated by our good lobbyists (and yes, I believe there are good lobbyists) from the AICPA, was a provision that would have expanded the services of the Farm Credit System to include tax and accounting services for farmers and small business in rural America. The AICPA rightly opposed this, and even though their position is based on the self-interest of its members, the opposition was also principled. A press release on this topic can be found here.

Have a happy weekend. And enjoy some sausages on the grill.

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