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Editorial: Tax breaks for business show need for reform

We recommend a stiff drink before perusing the details of the deal that postponed fiscal cliff-diving. Something with rum would be appropriate. Pop in a tiny umbrella, and you can pretend to be on a cruise to Puerto Rico.

Part of the deal that Congress passed on New Year’s Day included a batch of “tax extenders,” which means tax breaks for specific businesses. With the government $16 trillion in arrears, you wouldn’t think Congress would take time to uncork more favors, but our convoluted tax code has produced legions of lobbyists who are adept at securing them. Of course, it helps to have willing politicians such as Sen. Max Baucus, D-Mont., head of the Senate Finance Committee, to protect these deals even as other taxes, such as the payroll levy, were being raised.

Apparently, American workers need better lobbyists. There was a time when their representatives played that role. Here are some examples included in the $63 billion in tax breaks Congress extended on Tuesday, according to a Los Angeles Times article:

• For a century, the feds have collected an excise tax on rum and returned the money to Puerto Rico and the Virgin Islands. The idea was to spread the proceeds among the citizens via public programs. In reality, it has become a huge tax break – $547 million in 2009 – for rum producers. The Virgin Islands tapped that spigot to build a Captain Morgan distillery for a large British booze conglomerate, which is no doubt singing “Ho, ho, ho and a bottle of rum” upon learning that this giveaway was preserved.

• A tax credit for wind power was rescued, at a cost of $12 billion over 10 years.

• A $266 million tax break for television and film productions that shoot in the United States was extended for a year.

• A $46 million tax break will allow NASCAR track owners to continue to depreciate assets faster than other businesses. Vroom!

In the context of a $3.5 trillion budget, these aren’t massive numbers, but they do point out why we need tax reform as the next step toward fiscal sanity. Lowering the deficit and debt would do far more for the economy and job creation than does Congress picking winners and losers via the tax code – and campaign contributions. If that means some lobbyists get laid off, so be it.

The next big opportunity for fiscal discipline will come when President Barack Obama releases his budget in February. He must include a plan to simplify the tax code to end these special deals and to bring in more revenue. He also needs to specify significant phased-in cuts to our largest government programs, because spending was left out of the New Year’s Day deal.

For their part, congressional Republicans need to stop suggesting that a government shutdown in March is an option. That’s sheer madness that will kill the current economic recovery and financial market gains.

Nobody who wanted a long-term solution to our budgetary binge-drinking is happy with the fact that Congress and the president couldn’t get it done. But it’s outrageous that they preserved these specials and put it on the taxpayers’ tab.


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