Wednesday, January 16, 2013

Crony watch: "Tax extenders"

The miasmic details of the fiscal cliff deal keeps bubbling to the mucky surface of Washington's swamp:

The best tax loopholes hide in plain sight.

While the recent fiscal negotiations focused mostly on changes to the top income rate, the final bill (H.R. 8) contains a bonanza—52, to be exact—of what are known as “tax extenders.” The tax extenders are temporary or permanent extensions of special tax relief for particular industries or types of investments.

Congress likes these tax extenders, which have come to dominate the tax legislative process in recent years. The temporary nature of extenders reduces their estimated costs; budget estimates assume that the provisions will sunset as promised, instead of being extended each year, as most in fact are.

In addition to finessing the budget process, the annual ritual of enacting the tax extenders gives Congress a regular opportunity to check in on favored industries to see if they have been naughty or nice. As public scrutiny has led to a decline of direct spending in the form of earmarks, indirect spending through tax expenditures has become a more comfortable method of extracting campaign donations from industry and doling out tax breaks in return.

This is what corruption looks like in the information age.

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