Today, Americans will shell out millions of dollars on bourbon, fancy hats, and garish outfits as they prepare for one of sport’s great traditions: The Kentucky Derby. But the tab for those mint juleps and seersucker suits isn’t all race-watchers will be picking up this weekend.
Even if they’re not buying tickets or placing bets, American families and small businesses will also be footing the bill for tens of millions of dollars in giveaways for the horseracing industry, thanks to a special-interest earmark in the federal tax code.
This obscure provision costs Americans somewhere between $70 and $100 million each year and is just one of many so-called “tax extenders” — short-term, lucrative handouts that politicians set aside each year for the corporations and industries well-connected enough to lasso them. The preferential tax deal for racehorses, for example, allows owners to deduct the cost of the horse from their taxes over a short period and confers other tax benefits.
As unseemly as this particular subsidy is, it isn’t the only old nag in the tax code that ought to be taken out behind the barn and put out of its misery. The federal tax code is replete with little-known multi-million dollar loopholes providing taxpayer support for everything from Hollywood film and television productions, which fleeced taxpayers to the tune of an estimated $245 million last year, to motorsports complexes, which got $11 million worth of breaks that same year. Taxpayers even backed Caribbean rum producers, which reaped $168 million in special tax breaks last year alone.
Clearly there’s no limit to the special favors our lawmakers are willing to dole out to a select few industries. Special carve-outs in the tax code such as these pad the bottom lines of politically-favored groups. And all of this is done at the expense of hardworking taxpayers, who end up saddled with higher tax rates to compensate for the cost of these sweetheart deals.
Yet last year a few of the extenders failed to make it across the finish line. While lawmakers made many of the tax extenders permanent late last year as part of a $680 billion tax extender package, a few of the extenders — including the racehorse handout — were omitted from the legislation and are now scheduled to expire.
That’s the good news.
The bad news is that lawmakers are chomping at the bit to extend this unbridled corporate welfare instead of putting it out to pasture where it belongs.
As Congress draws closer to the August recess and the November election, lawmakers will likely begin exploring creative ways to get tax provisions like the racehorse tax extenders attached to a piece of must-pass legislation guaranteed to make it to the homestretch. In fact, just a few short weeks ago, there were murmurings of an effort to hitch this handout and others like it to an unrelated bill reauthorizing the Federal Aviation Administration.
Fortunately for taxpayers, mixing FAA legislation with corporate welfare like this didn’t work, and Congress committed to pass a “clean” reauthorization bill — for the moment. Still, it’s a safe bet that lawmakers will make more attempts at legislating some giveaways for their horse-owning friends before adjourning at the end of the year.
Congress and the White House have failed to rein in these egregious examples of corporate welfare for too long. Leaders in both political parties constantly talk tough about but the need to reduce government spending, yet all that talk is meaningless if they’re willing to allow big businesses, corporations and special interests to receive expensive tax subsidies.
Taxpayers should hold political leaders to a higher standard and demand that they get a handle on runaway spending. That means simplifying the tax code — not riddling it with holes designed to help one group or another graze at the public trough. There’s nothing wrong with having a great time at the Kentucky Derby or even owning the next American Pharoah, but corporate welfare shouldn’t be paying the bill.
Mac Zimmerman is director of strategic policy at Americans for Prosperity. Thinking of submitting an op-ed to the Washington Examiner? Be sure to read our guidelines on submissions.
