It’s surprising that so many so-called journalists misunderstand, but it’s a widespread failure, and it includes too many economists, as well. For good or ill, there is a loophole in the 2018 tax law that’s providing windfalls for American companies.
The loophole is a mismatch of critical dates between that law’s Section 245A and Section 78. The former lets US companies bring home their foreign profits without paying US taxes, with an effective date of 1 January 2018; the latter was intended to prevent inappropriate tax breaks in the old international tax system, with an effective date of 31 December 2017. Those 24 hours are a loophole far beyond the size of a single day. Three companies, for instance, are claiming—and one has already won in court—tax refunds:
[Varian Medical Systems won its case for] $150 million in deductions. The electronics manufacturer Kyocera and the food distributor Sysco have similar court cases pending, each involving more than $100 million in deductions.
Others are putting together their own refund filings that, in their aggregate will be worth several tens if not hundreds of millions of dollars more.
The misunderstanding is not about the Congressional gridlock blocking reconciliation of those two dates, as the writer of the Wall Street Journal article went on about, even though she got it right in her lede.
That [loophole] is now allowing big companies to save tens or hundreds of millions of dollars that otherwise would have gone to the government.
The misunderstanding—an understanding which goes to the core of our tax system and its and its constitutionally mandated purpose—is this:
The Varian case highlights how gridlock in Congress can cost the public….
No. Leaving money in the hands of our private economy, or returning money to those hands, is not a cost to the public—we American citizens and our enterprises are that public—but a benefit to the public, to us. Leaving the money or refunding it does reduce the amount of money accruing to Government, but that also could be a benefit to the public by restricting the money available to government to misspend. That latter, though, puts the onus on us in the public to elect politicians who will honor that restriction by not borrowing to spend more than government takes in and by not raising taxes to match excess spending.
Then there’s this:
A recent ruling by the Supreme Court will put more emphasis on the literal text of laws….
Literal text of the laws: the text of a law is what Congress intended the law to say, else Congress would have passed a different law saying something different.
And that’s as it should be, since the American system of governance restricts legislation to Congress and judicial action to the limits of those laws’ text. Judge Emin Toro, writing in his ruling on the Varian case, was quite clear on this:
Congress “spoke clearly” when it selected the mismatched effective dates. “Appeals to policy and Congress’s overarching purpose cannot overcome these choices[.]”
Activist judges—and that’s the only kind that presumes to legislate from the bench, that presumes to Know Better than the rest of us what a law should be—are broadly held as Truth Sayers by the Left and its Progressive-Democratic Party. These unelected representatives judges writing law rather than ruling within it are the bane of American liberty.