The all-encompassing problem of special interest tax policies
In 2013, tax reform was given major support in the Senate by the Finance Committee and in the House by the Ways & Means Committee. But first, said the politicians, tax “extenders” that help big companies get research tax credits, equipment write-offs, etc. had to pass. For “certainty,” we were told.
That argument, we now know, was a gigantic farce. The Chairman of the Finance Committee left Congress to be an ambassador to China, and when the Chairman of the Ways & Means Committee put out a draft tax reform bill earlier this year, it was all but ignored by the leadership of both parties.
Despite this clear evidence that Congress isn’t serious about tax reform, new Finance Committee Chairman Senator Ron Wyden (D-Oregon) recently said that a new batch of tax extenders, worth tens of billions of dollars in tax credits and cuts, “will be the last extenders bill the committee takes up as long as I’m chairman.” He also says getting extenders put in place will help with “certainty” as tax reform is debated.
Of course, if the Senate is taken over by Republicans in 2015, as seems likely, his promise will be irrelevant. Either way, this game will continue, with Big Business benefiting off their D.C. connections, and the rest of us being ignored by our elected officials.
And it’s not just Congress that’s at fault. Early in 2013, White House Press Secretary Jay Carney told reporters that $67 billion in Big Business tax extenders were necessary to prevent economic harm. This was the same White House whose primary resident had campaigned on how raising taxes was good for the economy.
The problem is also bipartisan. The Senate recently voted 96-3 to pass billions in extenders, which Reuters reports “includes tax breaks for auto race tracks, wind energy, multinational corporations, Hollywood, school teachers, Puerto Rican rum producers, college tuition and more.”
The problems with tax extenders isn’t limited to Washington, nor corruption. One-fifth to one-quarter of Earned Income Tax Credits (EITC) are given fraudulently, and a recent report shows that nearly one-half of alimony tax credits have reporting issues. And approximately 14.5% of tax dollars legally due in 2006 were not received by the IRS, partially due to the complexity of the code.
It would be nice if Congress was serious about tax reform, which would include flattening of the code or a replacement of the current system with a national sales tax. Alas, as is typical, they need a push from the American people. The question is whether We the People are willing to give up our own tax goodies in order to push this process along for the sake of our economy, our population at large, and the federal deficit.