Tax reformists aren’t optimistic about Congress overhauling the sprawling U.S. tax code anytime soon, but retiring Sen. Tom Coburn (R-OK) is giving it one last shot before he leaves Capitol Hill for good.
The senior senator from Oklahoma who has built his reputation on being extremely critical of the government’s spending practices just released a 300-page “tax decoder” report calling on lawmakers to do away with a number of tax breaks or “giveaways” that he thinks are wasteful and unfairly reward wealthy individuals and corporations.
In the lengthy report, Coburn targets 165 tax expenditures - from deductions for gambling, to tax credits for building giant sports stadiums that cost the Treasury more than $900 billion this year in total according to the senator. Coburn argues that in its current form, the tax code disproportionately benefits wealthy and powerful special interests.
"Powerful special interests and Washington politicians have turned the tax code into a complicated mess that rewards only a few at the expense of middle-class taxpayers," Coburn said in a statement. "For every tax break claimed by one company or offered to only certain groups, every other taxpayer and business must pick up the financial slack and pay higher taxes."
Coburn, who has been pushing for tax reform for years, is retiring in January. Though it’s highly unlikely, it appears that the senator is trying one last time to inspire his colleagues to dig into the tax code.
“Ideally, Congress would throw out the entire tax code and start over, but at the very least the code should be made simpler, fairer and flatter,” Coburn wrote in the report.
Here’s just a sample of what the senator thinks should be stricken from the tax code:
Tax Credit for Poor Areas Going to Big Firms
The New Markets Tax Credit was created nearly 15 years ago to offer banks an incentive to invest in small businesses in low-income areas with the hope that more jobs could be created in those communities. However, as the Government Accountability Office, as well as a separate investigation by Coburn’s office, have discovered that the credit is largely used by big firms and hedge funds. The tax break is estimated to cost about $10 million this year and about $82 million through 2018.
Tax-Free Housing for Religious Leaders
The parsonage housing allowance, which has been buried in the tax code since 1921, allows religious leaders to get tax-free housing. Coburn argues this is unnecessary and points out that the average salary of a pastor is well above that of the average worker. “While pastors may have been poorly compensated in the past, in most cases today that is no longer the case,” he said. “Religious organizations should always be able to practice their beliefs freely, but a preferential treatment for pastors’ salaries no longer meets its original purpose.” The report also includes some questionable uses of the credit, including one Christian recording artist and pastor in Florida who used the parsonage allowance to pay for his $1.4 million home in a gated community.
The American Samoa Economic Tax Credit-AKA the “Tuna Tax Break”
The American Samoa Economic tax credit is a multi-million dollar tax break used by companies operating in America Samoa, a United States territory in the Pacific Ocean. It was intended to help businesses offset the U.S. tax liability on earned income. However, it was narrowly written to apply only to companies that claimed the tax credit before 2006. Because of that, one company, Starkist, which produces canned tuna, has primarily benefited from the credit. The tax break cost $10 million this year alone, with most of that helping Starkist.
Historic Tax Credits for Sports Stadiums and Swanky Hotels
The historic preservation tax credits were intended to help preserve old, historic structures by incentivizing businesses to rehabilitate the old buildings instead of building new ones. However, in many cases, they have been used by big firms to help build major league baseball stadiums and luxury hotels.
Tax Breaks for 'Uncharitable' Charities
Non-profit organizations serving specific charitable purposes are waived from taxes, but this is a problem, Coburn says, when the organizations aren’t actually providing the services they claim. The report zeroes in on Lady Gaga’s 501(c)(3), the Born This Way Foundation, which raised $2.6 million in 2012, but only gave away $5,000 for “grants to organizations or individuals. Lady Gaga’s foundation is advertised as an organization that connects youth with anti-bullying, mental health, and other community resources, but its main activity appears to be throwing free preconcert tailgate parties for fans,” Coburn says in the report.
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