In a letter to Speaker Boehner and Majority Leader McConnell, ATR president Grover Norquist wrote the following:

"Thank you for your continued leadership in the debt limit negotiations with Congressional Democrats and President Obama.  Your resolute determination to keep the focus where it needs to be—spending—and not on the jobs-killing area of tax hikes is crucial to ensuring a pro-growth solution to Washington’s over-spending problem.

This week, the Obama Administration released a list of proposed tax hikes, measures which you have made clear are “off the table” for these negotiations.  One of these tax hikes would involve an inventory change called “LIFO repeal.”

Many companies from many different industries account for their inventory using LIFO (“last-in, first-out”) instead of FIFO (“first-in, first out”).  This has been a common and generally-accepted accounting practice for almost a century.  Some employers have been using this method for decades. 

President Obama and Congressional Democrats want to make these companies re-compute their inventory accounting retroactively, pretending as if they had been using FIFO this whole time.  When this results in a higher amount of aggregate taxable income, companies would be required to pay the 35 percent corporate income tax on the total lifetime difference between the LIFO and FIFO value.  This would be the largest retroactive tax hike in the history of the Internal Revenue Code--$53 billion over this decade, according to the proposal contained in the Obama Administration’s FY 2012 budget.  This is money that would be unavailable to create jobs and invest in America.

All tax hikes should be off the table, but retroactively taxing companies by making them change decades-old inventory accounting choices is a particularly-idiotic tax hike that should be ruled out definitively."

[Full PDF version here]

Posted by Ryan Ellis on Wednesday, June 29, 2011 1:35 PM EDT

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