President Obama has repeatedly called for doing away with special tax breaks he says litter the tax code — but he himself has recently proposed yet another new carve-out to push businesses to hire veterans and spur the economy.
He is not alone.
Even as the government’s dim fiscal picture pushes all sides to try to sweat savings out of the budget and all sides say carve-outs should be on the table, Republicans and Democrats on Capitol Hill are proposing their own special breaks, known as “tax expenditures” in legislative-speak, for items such as clean energy and student-loan repayments for veterinarians.
“We’re our own worst enemy,” said Sen. Tom Coburn, Oklahoma Republican and a vocal advocate for reforming the tax code. “And that’s based on parochialism and lobbying. You have to reform the tax code for two reasons — we’re wasting a ton of money and it’s stifling growth.”
After the last major tax reform was enacted in 1986, tax expenditures have risen steadily each year since the mid-1990s. They include breaks that benefit millions — such as deductions for retirement savings, charitable contributions and employer-sponsored health plans — as well as ones targeting much smaller groups of people.
The tax code is now littered with more than 200 credits, deductions or other tax expenditures, and the number has risen moderately over the past five years to reach roughly $1 trillion in revenue that the government would otherwise be collecting.
“Seems every member of Congress has a special tax break,” said Eli Lehrer, vice president of the Heartland Institute. “I’ve seen everything from retrofitting your house for earthquakes to donating organs.”
All sides agree that such programs are ripe for cuts — but senators also keep proposing new ones, arguing that the tax code is a good way to push people to make the kinds of economic choices that can stimulate the economy and produce much-needed jobs.
The new tax credit that has the best chance of passing is Mr. Obama’s veterans hiring proposal, which would offer up to $9,600 to businesses that hire veterans. Last week, Republican Rep. Peter T. King of New York joined Rep. Peter Welch, Vermont Democrat, in calling for action on the measure, and Republican leaders have said it’s an area where they could find common ground with Mr. Obama.
Republican Rep. John Sullivan in April introduced the New Alternative Transportation to Give Americans Solutions Act, known as the NAT GAS Act, which offers between $5 billion and $9 billion to encourage businesses to convert their trucks to natural gas. It has extensive support in both parties, but more than a dozen conservative lawmakers have withdrawn their names as co-sponsors, arguing that the government should not pick winners in the energy market.
Meanwhile, eight Republicans have signed on to a bill led by Sen. Tim Johnson, South Dakota Democrat, that would make a loan repayment program for veterinarians tax-exempt.
“This is a good investment in trying to get more veterinarians in rural areas, and like the president’s jobs bill there are lots of way to offset that revenue in other places in the tax code. There’s a shortage of vets out there,” said Perry Plumart, a spokesman for Mr. Johnson.
Sens. Benjamin L. Cardin, Maryland Democrat, and Mike Crapo, Idaho Republican, introduced the Energy-Efficient Cool Roof Jobs Act, which would allow businesses to depreciate energy-efficient roofs more quickly. Sue Walitsky, a spokeswoman for Mr. Cardin, said the bill would create an estimated 40,000 jobs, which would in turn send even more revenue to the government.
“The more people with jobs, the more people are paying taxes,” she said.
Even as the proposals pile up, attempts to simplify the tax code and increase revenue by repealing expenditures have gone nowhere.