Why are the tax laws so complicated? One of the main reasons is that they contain hundreds of special exceptions, deductions, credits, and other loopholes designed to benefit a single industry, or even just one company. Why does Congress add these to the tax code? In some cases, because they make contributors happy and thereby help Congresspeople obtain campaign contributions. In other cases, because they can accomplish a goal they are seeking to achieve.
The recent fiscal cliff tax legislation has lots of very specific targeted tax breaks--from ones benefiting Native Americans to NASCAR track owners to alternative energy users. Knowing that the bill had to be passed, and passed quickly, representatives and senators added to it a number of special tax breaks for a myriad of causes that will end up costing several billion dollars over the next ten years. In the words of legendary Senator Everett Dirksen: "A billion here, a billion there, pretty soon you're talking about real money."
Here are examples of some of the very targeted, special tax breaks included in the Fiscal Cliff tax deal passed in January 2013:
- A 50% tax credit for short-line and regional railroads to help them maintain their tracks. Cost: $331 million over the next two years.
- Tax breaks for NASCAR race track owners. Cost: $100 million over the next seven years.
- Tax breaks for business property on Indian reservations. Cost: $660 million over the next three years.
- Tax credits to encourage employers to hire Native Americans who work and live on or near Indian reservations. Cost : $119 million over the next four years.
- Tax credit for coal produced on land owned by an Indian tribe. Cost $1 million over ten years.
- Reduction of tax rates for Alaskan Natives receiving trust income. Cost: $46 million over 10 years.
- Enhanced education for businesses that contribute food inventory to charities. Cost: $314 million over two years.
- Enhanced deductions for shareholders of corporations that contribute property to charity. Cost $225 million over ten years.
- Enhanced deduction of film and television production costs. Cost: $430 million over the next two years.
- Extended deduction for businesses in Puerto Rico that are in production activities. Cost: $358 million over the next two years.
- Economic development credits for American Samoa. Cost $62 million over two years.
- Expanded credits for purchasers of plug-in electric motorcycles. Cost: $7 million over three years.
- Extended tax credits for producers of biofuels. Cost $59 million over ten years.
- Tax credits for renewable diesel fuel and small agricultural producers of biodiesel. Cost: $2.2 billion over the next five years.
- Tax credits for producers of alternative fuels other than liquefied hydrogen. Cost: $360 million over the next two years.