Rush to Defend Tax Rule on Inventory and Profits

[WestVirginiaRebel]

NY Times:

WASHINGTON — One of the biggest revenue-raisers proposed by President Obama in negotiations with Congress is what he describes as an arcane change in the tax treatment of business inventories — things like steel, groceries and oil.

But however complex the details, the effect of the change would be substantial, and in pushing for it Mr. Obama has kicked a hornet’s nest. Lobbyists from companies of all sizes are swarming around Congress to kill the proposal, which would prohibit the use of an accounting technique known as last in, first out, or LIFO. The technique is used to determine the cost of goods sold, and therefore the income earned, by a company.

Mr. Obama’s proposal, projected to raise $65 billion to $95 billion over 10 years, would increase the taxable income and tax liability of companies that have been using this method of accounting for decades. Small businesses, manufacturers, wholesalers, retailers and oil companies would be especially hard hit.

At a meeting late last week two dozen business lobbyists, working together as the LIFO Coalition, decided to redouble their efforts against the proposal by making urgent appeals to debt negotiators and lawmakers from both parties and both chambers.

The money at stake far exceeds the amounts that Democrats want to raise by curbing tax breaks for owners of corporate jets, yachts and racehorses — the populist proposals frequently invoked by Mr. Obama to make the case that he is not seeking tax increases on the middle class.

Jay Carney, the White House press secretary, said the LIFO proposal — supported by the president’s deficit-reduction commission — would simplify the tax code and establish a standard method of calculating the cost of items that a company sells. Those costs are typically subtracted from the proceeds of a sale to determine the company’s taxable income.

Senator Jon Kyl, Republican of Arizona, said that in budget negotiations the White House had pushed harder for “repeal of LIFO” than for any other tax proposal. Mr. Kyl was the Senate Republican delegate in talks led by Vice President Joseph R. Biden Jr.

Visiting an Alcoa plant in Iowa last month, Mr. Obama emphasized the importance of creating jobs in manufacturing. But manufacturers say the repeal of LIFO would have just the opposite effect.

“The president’s proposal would be devastating,” said C. William Jones, vice chairman of O’Neal Industries, a 90-year-old family owned metals company in Birmingham, Ala. “It would increase our tax bill by tens of millions of dollars. Thousands of companies would be affected the same way.”
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The Obama administration-killing off American businesses, one tax proposal at a time.