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
- 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
- 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
- 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
- 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.