As we head into the final day of voting in the Tournament of Government Waste, it is important to highlight waste in the recently “reformed” tax code. Last year, Republicans echoed the same talking points after the passage of tax reform, saying it will lower taxes for the middle class and businesses, and simplify the tax code. But one thing they conveniently forgot was the elimination of the hundreds of loopholes within the code.
Senator Jeff Flake featured one of these tax loopholes in the Tournament of Government Waste, the Alpaca Tax Fleece. Although upset in the first round by a worthy opponent, Doggy Hamlet, the waste is nonetheless an egregious example of how spending is done through the tax code. According to the Senator Flake’s Tax Report, “The price of purchasing livestock, including furbearing animals, can be deducted as business costs.” Alpacas cost upwards of $4,000 making them an extremely valuable write off at tax time.
Although Congress, too afraid to challenge the constituencies in the swamp, missed out on eliminating loopholes, Senator Flake is leading the charge to make them more transparent.
Last October, Senator Flake introduced the the Tax Expenditures Accountability Act which would “require the Treasury Department to post any entity receiving federal tax credits online. Along with the name of the recipient, the type and dollar amount of each tax credit would be specified.” Flake’s idea is much like the one Senator Tom Coburn had for USAspending.gov.
USAspending.gov, the revolutionary “google type” site that allows you to see what the government spends tax dollars on, went live in 2007 and has uncovered hundreds of billions of dollars of waste, fraud and abuse due to the oversight of Capitol Hill staffers and average joes around the country. Flake said, “Congress cannot reform the tax code if we do not even know what loopholes there are, the cost of each, and who they are benefiting…Every tax give-away to one special interest represents a tax hike for everyone else, which Congress should be prepared to justify.”
For example, if the Boston Red Sox received a $40 million federal grant to help them renovate Fenway Park, that information, disclosed through USAspending.gov, would likely receive public outcry. Yet, when the Boston Red Sox received $40 million worth of federal tax credits to support their $285 million renovation of Fenway Park in 2012, there was no disclosure, no transparency. Same with the $40 million tax credit to support the renovation of the Old Post Office Building into the Trump Hotel in Washington, D.C. Contracts, grants, and tax credits all direct taxpayer resources to a project or activity, but only tax credits go without disclosure. Taxpayers should know how all of their tax dollars are being directed, and Flake’s bill would help to advance that.
The Senator from Arizona, who has championed the Wastebook after Senator Coburn retired in 2014, is right to take on this side of the tax debate. In October, prior to passage of the Tax Cuts and Jobs Act, Flake penned an op-ed saying, “there are more than 200 loopholes buried throughout the tax code that collectively cost $1.23 trillion annually. This exceeds the total amount spent annually by the federal government for all discretionary programs, which includes defense, education, transportation, foreign aid and the environment.” The tax reform bill did little to change that dynamic, and may have exacerbated the problem. Throughout the process, there has been little discussion about the well-connected and special interest groups reaping massive benefits through the tax code.
While alpacas and baseball stadiums may sound like a ridiculous excuse for a tax break, every tax credit or loophole has a constituency. Loopholes go unchanged year in and year out because some Member of Congress is unwilling to challenge that constituency, no matter the burden it places on the American public and next generations. Flake predicted this before tax reform was passed saying, “We could see many [Members of Congress] who would rather scuttle tax reform and threaten everyday Americans keeping more of their own paycheck than see these loopholes hit the wastebasket where they belong.”
Senator Flake’s bill isn’t asking Congress to debate or eliminate loopholes. His bill is simply asserting that the American public should be able to see who gets their tax dollars and for what amount. Transparency, just like government waste, shouldn’t be a partisan issue. In this day and age, we expect to have all the information at our fingertips, government spending through the tax code should be no different.