Tax extenders adorn the special interest Christmas tree
© Greg Nash

Congress is in its usual end-of-year scramble mode, looking to wrap up legislative loose ends before heading home for the holidays. Alas, for taxpayers this is the most dangerous time of year. It’s when Washington is in a giving mood – at least if you’re a special interest.

What exactly is Congress fixing to put under the special interest Christmas tree this year? How about billions in so-called tax extenders, the ultimate inside-the-Beltway term for special interest tax giveaways, many of which expired at the end of 2017. In line to get these handouts are racehorse owners, motorsports complexes, Hollywood filmmakers, biofuel producers, electric vehicle owners and more.

Think of extenders as sort of like that holiday fruitcake your aunt sends you every year. You didn’t ask for it, but it just shows up. Year after year after year.

ADVERTISEMENT

Even worse, some politicians aren’t just trying to renew the extenders, but seeking to make others apply retroactively. That’s right. So even though tax filing season for 2018 is long over and we’re about into a new year, if you’re one of the chosen few you may be able to claim a handsome tax deduction that wasn’t even in existence last year.

Proponents argue that these tax breaks are necessary to “encourage certain behaviors.” But isn’t it a little late to encourage behavior that’s already occurred?

The irony is that Congress took an important first step forward by eliminating some tax loopholes and carveouts for the politically connected with the passage of the Tax Cuts and Jobs Act of 2017. And because of tax reform, billions of dollars in handouts for special interests were allowed to expire at the end of 2017. What is the economic rationale for bringing them back?

Here we are, nearly two years to the day since tax reform was enacted. The economy continues to grow. Corporations that are at last enjoying an internationally competitive 21 percent corporate tax rate are growing and expanding as a result. At last count, hundreds of companies have invested in their workers, businesses and the economy. And wages, particularly those at the bottom end of the scale, are rising rapidly.

If certain businesses can’t make it in the current economic environment without a taxpayer handout, you have to wonder whether retroactive tax incentives will do the trick. Maybe it’s time to cut these industries loose and let consumers decide.

ADVERTISEMENT

In May, groups spanning the ideological spectrum came together to sign a letter to Congress urging lawmakers to oppose reviving the tax extenders, calling it “bad tax, fiscal, and economic policy” and saying we should “let what is dead remain dead.” The groups also called on Congress to root out additional corporate welfare by eliminating special breaks that still remain in the tax code.

Government should not be in the business of rigging the game by picking winners and losers in the economy. It should act as a neutral arbiter by securing our rights, enforcing contracts and establishing a level playing field, with everyone abiding by the same set of rules.

Government favoritism is not just unfair, it distorts the free market, holds back the economy and incentivizes businesses to squander resources on rent-seeking that could be used to create value.

There is no economic or fiscal rationale for renewing these special interest tax breaks. If Congress can work up the courage to say “no” to these extenders, it would be an early Christmas present for taxpayers.

Now, if we could just do something about those fruitcakes.

Michael Lambert is a policy analyst at Americans for Prosperity.