Channeling Toby Keith, Congress has a strong penchant for rum. Not necessarily drinking it, mind you, but subsidizing it.
For years, Congress has been offering special tax breaks to rum producers, allowing them to write off large parts of their tax bills. This is just one of many bizarre tax incentives Congress gives out every year.
Sound like an oddity? It’s actually a tradition. Come Dec. 31, dozens of expiring tax incentives miraculously find new life. Together, these incentives are referred to as “tax extenders” because they are perpetually extended well beyond their originally intended lives.
This year, Americans may have to pony up to cover $19.4 billion worth of these special carve-outs. There are currently 36 tax incentives expiring at the end of 2016, in addition to renewable energy subsidies Congress may renew.
But all of these are handouts to special interests. Aside from the breaks for rum producers, there are giveaways for racehorse owners, racetrack operators, Hollywood producers and a wide variety of energy companies. Among these, renewable energy gets one of the biggest tax breaks: $7.4 billion a year.
This is the wrong way to use the tax code. Tax policy should be neutral and apply fairly to everyone. Riddling it with exceptions, loopholes and preferential treatment makes our tax code a vehicle for corporate welfare.
Given that this is bad public policy, Congress won’t make these tax breaks permanent. But there is enough political support from those financially benefiting to make sure they do not expire. As a result, dozens of provisions in our tax code are stuck in limbo year after year, creating a nightmare for accountants and businesses trying to plan for the long-term.
How does Congress do it? This year, tax extenders will likely be attached to so-called must-pass legislation at the end of the year. This will be what’s known as the “lame duck” legislative session, when members who’ve been voted out or are retiring still have a chance to influence legislation even though their replacements have been elected.
Because Congress failed to pass a long-term spending bill, lame duck lawmakers will get to vote on a spending bill covering 2017, and this will likely be where they try to squeeze tax extenders through.
This must not be allowed. Lame duck lawmakers no longer face re-election and are unaccountable to their constituents. With nothing to lose, some may do their utmost to please special interests, including the aforementioned rum makers and racehorse owners.
It’s possible to put a stop to these giveaways. Principled members of Congress had a rare victory earlier this year when some lawmakers tried to tack specific energy tax extenders onto a federal aviation funding bill. Thanks partly to the efforts of a coalition of grassroots organizations, these subsidies were left out of the final bill.
With more hard work and a little bit of luck, the American people can persuade members of Congress to let the remaining tax extenders expire. This would be a step forward for much-needed tax reform, allowing us to further simplify our tax code and eventually reduce overall tax rates.
Unlike special breaks for a lucky few, that’s something every American can raise a glass to.
Grant Kidwell is a senior policy analyst at Americans for Prosperity. Thinking of submitting an op-ed to the Washington Examiner? Be sure to read our guidelines on submissions.
