WASHINGTON — In the last-minute dealmaking to stop the nation from tumbling over the so-called fiscal cliff, Congress and the White House decided not to spare most people from a hike in Social Security payroll taxes. But they did find room for billions in special tax breaks for rum makers, racetrack owners, railroads — and Hollywood studios.
Riding along on the compromise bill were dozens of provisions that renewed existing tax breaks. All told, the business tax breaks will cost more than $63 billion next year, according to an analysis by the Joint Committee on Taxation.
Watchdog groups said the survival of the subsidies exposes the broken nature of the tax system — and Congress' inability to tackle it.
"These are basically spending subsidies written into the tax code, and there was just no discussion about them," said Robert Bixby, executive director of the Concord Coalition, which advocates for fiscal responsibility.
The measures had been examined in detail by the Senate Finance Committee, which approved them by a 19-5 vote in August. The package also includes extensions on popular breaks that benefit individuals, including the deduction for state and local taxes.
Sen. Tom Coburn, R-Okla., one of the few who voted against the measure in committee, said he fought vigorously against what he called "tax goodies for special groups."
"I lost every vote," he said.
The rum excise deal has come under particularly harsh criticism in Congress. Under the 100-year-old arrangement, the government collects a tax on rum and returns nearly all of it to Puerto Rico and the Virgin Islands to support public programs — distributing $547 million in fiscal year 2009.
In 2008, the Virgin Islands agreed to use that money to finance a new Captain Morgan distillery for Diageo, the giant British spirits company. The company moved its operations from Puerto Rico. Now, other rum makers have gotten in on the deal, and critics say the tax, rather than helping average people, has become a subsidy to the industry.
Also included in the bill is an extension of a tax break for film and television productions that shoot in the United States, allowing them to expense the first $15 million of costs (or $20 million if the production occurs in economically depressed areas.) The incentive will cost an estimated $266 million in 2013.
The so-called "NASCAR tax break," which will cost an estimated $46 million this year, allows motor racing tracks to depreciate assets faster than other businesses.
"This tax provision is a job creator," said Rep. Mike Thompson, D-Calif., whose district includes the Infineon Raceway in Sonoma. "Without it, folks would see job losses."
Steve Ellis, vice president of Taxpayers for Common Sense, a group that advocates cuts in Washington spending, said he was surprised to learn the provisions made it into the bill.
"I guess I shouldn't have been," he said. "They're like the cockroaches of Washington policy. They always survive."
Written By: Joseph Tanfani and Matea Gold
Original Publication URL: http://www.rep-am.com/articles/2013/01/03/news/national/694465.txtDiscussion