On Wednesday, Senator Jeff Flake (R-AZ) unveiled his latest compendium of government waste. Unlike past reports on wasteful spending, like the 2017 Wastebook and this list of dubious government studies, “Tax Rackets” takes on the Tax Code.
Buried deep in those pages, taxpayers looking to (understandably) lighten their tax bill can find a variety of tax credits, deductions, and shelters. Sen. Flake’s report sheds light on some of the more problematic ways to avoid the Tax Man - carve-outs that aren’t widely available and arbitrarily favor some industries: such as alpaca farming, gambling, and even chicken manure derived biomass energy.
Using the Tax Code to pick winners and losers not only compounds its complexity - it distorts markets, steering financial resources to unproductive and otherwise uncompetitive areas of the economy. For instance, as the report explains: there is essentially no market for alpaca wool in the U.S. These fluffy, doe-eyed creatures are little more than a savings account on four legs.
Likewise, it’s unclear that using chicken waste to light our homes is any better for the environment than conventional disposal methods. Worse, because biomass electricity production is more expensive than other traditional energy sources, in order to be competitive biomass facilities require not only a generous tax credit, but also low-interest loans and federal subsidies from other agencies.
The Tax Code has become just one more way Washington creates an uneven playing field for many industries and individuals. Comprehensive tax reform that lowers the rates and eliminates these giveaways is the best way to address this ongoing institutional favoritism. Tax reform is a win-win for everyone: reducing write-offs and loopholes, leaving more money in the hands of hard-working Americans, and spurring economic growth. Perhaps best of all, you won’t have buy a flock of chickens, or make a 20 year commitment to an alpaca - unless you really, really want to.