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How Would You Spend $773 Million?

The Senate’s top tax writers recently announced that all the tax breaks that currently litter our tax code could be on the chopping block if they rewrite the tax code this fall.  Now, special interest groups are up in arms, fearful that they may lose the lucrative tax breaks they’ve become so accustomed to receiving.

National Journal reports that special interest groups spent $773 million during the 112th Congress on tax lobbying.  They are working overtime to make sure their tax breaks don’t get whisked away in a tax code overhaul in Congress.

It would be worth every dime for them, too.  The incentive lawmakers have to rewrite the tax code is clear: our current code is riddled with loopholes, resulting in massive economic distortion.  Many of these tax breaks – roughly $1.3 trillion a year – should be eliminated as part of a broad rate reduction; yet, because of powerful special interests, they are “notoriously hard to eliminate.” Thus, tax writers’ in Congress have adopted a blank-state attitude toward them.

National Journal reports:

July and August should be hectic months for tax lobbyists and for companies, as they try to keep tabs on the behind-closed-doors machinations of the House and Senate tax committees and as they look for face time with lawmakers and staffers. Just within the last 30 days, 14 new lobbyists for companies–including Genentech, Boston University, AK Steel, and Bond Dealers of America–have filed registration papers to lobby on tax issues, according to Sunlight Foundation data.

New registrations of tax lobbyists and clients spiked in April 2013, with 108 new papers filed. The last time tax-lobbyist registrations increased so much in one month happened in October 2012, right before the fiscal cliff.

During the 112th Congress, groups spent $773 million on tax lobbying, according to the Sunlight Foundation. Forty-six percent of all registered lobbyists worked on at least one tax issue. Longtime observers of lobbying predict that 2013 will be no different.

Conservatives do not believe in picking winners and losers in the tax code.  Special interest lobbyists – from unions and environmentalists groups to big business interests – are fighting to ensure Congress artificially makes them winners.  The federal government, in turn, uses the tax code to encourage and discourage certain behaviors – like investing in green energy.  For example, Heritage notes:

Preferential policies already plague the tax code, mostly through tax breaks for alternative energy and ostensibly energy-efficient durable goods like cars and household appliances. True tax reform would weed out these policies in order to make the tax code more neutral, and use the extra revenue to lower marginal tax rates. 

The government shouldn’t use the tax code to meddle in the free market – giving tax breaks to special interest groups while raising taxes on things the government would like to see less of.  Not surprisingly, big-government interest groups are going to go full throttle in 2013 to ensure they get special treatment.

Why does this matter?  Heritage explains:

As favoritism grows with the size of the government, economic freedom continues to be eroded by policies like bailouts, loan guarantees, and tax exemptions. Privilege has replaced the good public economic policies of freedom. The influence of a select few is eroding our economic values and introducing perverse incentives and inefficiencies that hurt our competitiveness.

Such privileges strike at the heart of our society’s values and affect every American. This allocation of certain privileges to certain groups also has dire consequences for our economy, hurting the American consumer by reducing competitiveness and raising prices.

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