You thought the tax debate in Congress this week was about extending the Bush tax cuts, right? Or unemployment insurance?
It is about those things, but it’s also about a long list of smaller tax provisions that have been salted into the bill as Congress does what Congress always does with big tax bills—load it up with unrelated provisions that benefit special interests.
The handouts raise a basic question of fairness: Why are these interests getting special treatment and other industries are not? The answer is a combination of political muscle and political inertia.
Many of the special interest tax carve outs are inserted by lobbyists working with pliant members of Congress to benefit a particular industry. Others are in there because they’ve always been in there—or at least been in the tax code in one way or another for so long that it feels to members of Congress that they’ve almost been grandfathered in.
The group Taxpayers for Common Sense has done a concise roundup of all the items in this year’s bill, which you can see here.
Some of their most interesting findings:
Ethanol tax credits, the group calculates, are worth about $6 billion in 2011, and they are part of something called the Volumetric Ethanol Excise Tax Credit, which is the largest subsidy to corn ethanol. It goes to fuel blenders, not farmers, and that means companies like Shell Oil are collecting the credit.
The NASCAR racing league is pleased by the appearance of a tax write-off provision for owners of “motorsports entertainment complexes,” who will be able to write-off the cost of their facilities on their taxes over seven years, instead of the standard 39 years for nonresidential property. That will cost taxpayers about $40 million in 2011, and benefit the companies that own the race tracks.
It will also indirectly benefit NASCAR, which pays to rent the tracks for its races, and depends on access to cheap, high-quality facilities. "Allowing the track promoters to be able to spend capital to keep their facilities top rate is important to us, and to our fans,” said Ramsey Poston, NASCAR spokesperson.
The bill also includes an extension of expensing ruled for films and TV shows produced in the United States. At a cost to taxpayers of $162 million in 2011, the bill extends for two years the option of immediately deducting significant costs for most film or television productions.
The idea is to keep Hollywood from shooting too many of its products outside the country in cheaper locations. That’s why, for example, you see so many shows on the air using Vancouver or Toronto as backdrops for stories that are supposed to be set in New York.
And don’t forget the rum industry. Included in the bill is a measure that would extend a complicated tax program involving rum revenues in Puerto Rico and the Virgin Islands. It would cost taxpayers $235 million in 2011, and would help the Virgin Islands build a distillery to shift production of Captain Morgan from Puerto Rico.
US taxpayers don’t have a dog in that fight, but they are picking up the bill.