As part of their year-end budget deliberations, members of Congress are considering which special tax breaks to renew before the 2015 tax filing season begins and it’s too late for filers to take advantage of them.
Since 1998, a package of tax breaks have expired and then been retroactively extended seven times, earning them the “tax extenders” label. At the end of 2013, 55 such temporary tax breaks in the federal tax code expired.
All year, individuals and businesses have been dealing with the uncertainty of whether or not the tax breaks will be renewed and apply to their 2014 taxes. Congress has known since January 2013 that these tax breaks would expire at the end of 2013, but they’ve failed to reconcile their legislative differences on this issue nearly two years later. This is a ridiculous method of governing. But some of the things you can get a tax break for are even more ridiculous:
1. Racehorses
Racehorse owners aren’t typically down-on-their-luck laborers who need a helping hand from the government to get by. Racehorses are clearly a luxury item. This tax break allows owners to depreciate the value of their racehorse over three years instead of seven. A two-year extension of the racehorse tax break is estimated to cost the federal government $73 million in revenue in 2015.
2. NASCAR
Thanks to lobbying efforts by International Speedway Corporation, which owns 12 NASCAR tracks across the nation, any investment in a motor sports entertainment complex can be depreciated over 7 years instead of 15 to 39. As with every sports stadium that receives a government handout, NASCAR tracks do not add significant value to the local economy and are unworthy of special tax treatment. A two-year extension of the NASCAR tax break is estimated to cost the government $12 million dollars in revenue in 2015.
3. Plug-in electric motorcycles
Who knew the electric motorcycle lobby was so powerful? Give credit to Senate Democrats for narrowing this tax break so that only two-wheeled vehicles that can reach highway speeds are eligible. Regardless, there is no reason individuals should get a credit for purchasing any type of motorcycle, let alone an electric one. Extending the plug-in electric motorcycles tax credit is estimated to cost the government $2 million in 2015.
4. Puerto Rican and Virgin Islands Rum
When the federal government collects the liquor excise tax on rum produced in Puerto Rico and the Virgin Islands, it sends the revenues back to the government in the producer’s country of origin. The amount sent back had been capped at $10.50 per proof-gallon, but a tax break raised the cap to $13.25 per proof-gallon. The program has resulted in the Virgin Islands and Puerto Rico subsidizing rum production in order to maximize their revenue return from the federal government. Cheaper Captain Morgan is estimated to cost the federal government $168 million in 2015.
5. Hollywood productions
The film industry already receives generous tax treatment from many state and local governments. At the federal level, the film and TV production credit allows film and TV producers to expense the first $15 million of production costs. Numerous studies have shown that film & TV tax credits do not boost economic growth or create jobs. This tax credit is estimated to cost the federal government $387 million in 2015 if it is extended for two years.
6. Wind production
If President Obama’s energy policy is truly “all of the above,” it should have all energy sources compete on a level playing field. Producers of wind and other renewable power sources should operate under the same rules as natural gas, nuclear and coal. A two-year extension of the wind production tax credit will cost the federal government $116 million in 2015, but it will cost $13.4 billion over 10 years because the credit is applied for 10 years on facilities under construction by the end of 2015.
One could argue that other tax extenders are more useful, such as the research and development credit or enhanced charitable deductions for businesses that donate food inventory. Current House Ways and Means Chairman Rep. Dave Camp, R-Mich., wants to make these and a few other tax extenders permanent.
If useful tax extenders are going to be renewed every two years, Congress should reduce uncertainty and make them permanent. But please, let these six ridiculous tax extenders die.
