Tax breaks for well-connected
By Andy Koenig Christmas season is here, and Pennsylvanians are expected to top their estimated $7.2 billion in holiday spending from last year. But while families prepare to crowd around their Christmas trees to see what St. Nick has in store, corporate lobbyists are already circling Washington for a goodie season of their own.
By Andy Koenig
Christmas season is here, and Pennsylvanians are expected to top their estimated $7.2 billion in holiday spending from last year. But while families prepare to crowd around their Christmas trees to see what St. Nick has in store, corporate lobbyists are already circling Washington for a goodie season of their own.
The goodies are called "tax extenders" and are one of the worst examples of corporate welfare in America today. Composed of more than 50 separate temporary tax credits, the current proposed two-year extension will cost taxpayers $95 billion over the next decade.
But these credits are "temporary" in name only. In fact, many of these one- or two-year extensions have been renewed continuously since the 1980s. If that doesn't make sense, it shouldn't. Then again, most people's minds don't work the "Washington Way."
Congress uses these extenders - rather than making them permanent - for two primary reasons.
First, it helps hide the true cost of the policies. When each credit is extended for only a year or two, the Congressional Budget Office - the government's accountant - counts only those bite-sized pieces. Thus, even though Congress has every intention of renewing the credits every year, they don't look as bad for the federal budget.
The second reason is even more cynical: By having to take action every year or two, Congress has more opportunities to raise campaign cash. Think about it. If the favors were permanent, corporate lobbyists wouldn't need to continue asking for them - and the corporations that benefit wouldn't need to keep writing checks. But when those favors are temporary, it keeps the beneficiaries ponying up a little more each time around.
The facts speak for themselves:
A 2014 analysis found that nearly 400 companies and trade associations employed more than 1,350 lobbyists to lobby specifically on this set of tax breaks.
So what exactly are they buying? In short, it's a smorgasbord of unrelated credits that benefit the few at the expense of us all.
Start with the small - and ridiculous. One perk allows racehorse owners to depreciate their prize animals over three years rather than the usual seven. Cost to taxpayers: $95 million in 2016.
Another $95 million over the next decade goes to "motorsports entertainment complexes" by way of a special deduction.
Puerto Rico and the Virgin Islands also get a tax rebate for every gallon of rum produced by local distillers. That'll cost American taxpayers $308 million next year.
And don't forget about Hollywood. It gets to immediately deduct up to $20 million for shooting films, shows, and plays in specific locations.
In other words, while you're working hard and paying your taxes, Congress is giving dollars away to millionaires who have the right connections.
Yet these pale in comparison to other giveaways.
The most expensive is the tax credit for research and development. It will cost $22.6 billion over the next decade - with roughly 95 percent flowing to the largest 5 percent of companies. And for what? A 2009 report by the Government Accountability Office found that a "substantial portion" funds research that businesses "would have done anyway." So why are Pennsylvania taxpayers forced to subsidize it?
This is nonsense. Rather than continue this annual tradition, Congress should replace the extenders with lower, simpler corporate and personal income rates. This is the surest way to boost American businesses' international competitiveness and put more money in workers' pockets.
A recent Rasmussen poll found that 70 percent of American voters "think government and big business often work together in ways that hurt" the rest of us. Ending tax extenders in favor of lower overall rates would be a positive first step in fixing that perception.
Andy Koenig is senior policy adviser at Freedom Partners Chamber of Commerce. firstname.lastname@example.org