Arizona Sen. Jeff Flake has enthusiastically taken up the mantle of former Oklahoma Sen. Tom Coburn, whose annual “Wastebook” chronicled what he saw as profligate spending by the federal government. Flake, who publishes his own version of the book from his perch in the Senate, has also added companion volumes to the Wastebook, the most recent of which is the “Tax Rackets” report going after a handful of what he calls “outlandish loopholes to lower tax liabilities.”
However, it’s difficult to know, sometimes, whether Flake’s real object with these publications is to root out wasteful government programs or to spin selectively chosen federal policies in the worst light possible, creating the impression that the government is a feckless steward of the public’s tax dollars.
Flake, like Coburn before him, has a history of ridiculing scientific research grants without supplying any context about why the sometimes strange or obscure things they study might actually help advance larger efforts to cure diseases or solve environmental problems.
His last edition of the Wastebook identified some glaring examples of irresponsible federal spending. But it also spent pages and pages attacking government programs that it described in the worst possible light, frequently leaving out or downplaying information critical to understanding them.
The new Tax Rackets book is much the same. The first example identified is the “Alpaca Tax Fleece” in which people looking to reduce their tax liability in any given year can purchase any number of the South American-native creatures and immediately write off the entire cost. Flake’s staff identified some truly egregious abuse of the system by people who used the cost of the animals and their care to drive their taxable income to zero for years, and to claim large tracts of property as farmland, thereby greatly reducing property taxes.
Several of the “loopholes” Flake identifies in the report are examples of businesses taking advantage -- in some cases to apparent excess -- of laws allowing municipalities to issue municipal bonds to help finance projects that have a private component. This includes things like public golf courses operated by a third-party contractor, or in one case, a massive mall in New Jersey. Municipal bonds typically carry lower rates because the payments to bondholders are sheltered from taxes.
But other things that come in for Flake’s ridicule are more of a stretch.
The book attacks the federal government for what it describes as a “Telemarketing Tax Break.”
“As if telemarketers interrupting dinner or waking you from your sleep isn’t irritating enough, the tax code is providing a special telemarketing tax break for publishing companies to cover the costs of hiring more operators to call you.”
However, the program being criticized is much broader than the headline would suggest and allows publishing companies to write off expenses related to the acquisition of new customers. That includes, but is not at all limited, to telemarketers.
The book also goes into lengthy detail on what it calls the “Chicken Poop Tax Credit,” which goes to companies using biomass to create renewable energy with a smaller carbon footprint.
The “tax credits paid for the production of poultry poop power” as Flake puts it, are presented as though they could cost the Treasury $200 million per year. However, that figure is the total for the government’s entire open-loop biomass tax subsidy program, which includes not just chicken manure, but plant matter, yard waste, food waste and any number of other materials. To call the subsidy a “Chicken Poop Tax Credit” is more than a little tendentious.
In the end, like the Wastebook, Flake’s takedown of the flaws in the country’s system of tax expenditures is a hit-or-miss collection of truly egregious abuses and artificially inflated pseudo-scandals that seem more intended to outrage than to identify serious problems.