Senior Budget and Tax Policy Analyst
Cronyism runs deep in governments across the United States. Legislation to temporarily avoid the fiscal cliff was supposed to be a move toward comprehensive tax reform. It was the opposite. The deal included dozens of corporate tax breaks that will cost taxpayers billions.
All 31 tax breaks for corporations included in the fiscal cliff legislation can be found here. A recent article from The Wall Street Journal highlights the most contentious examples: a tax write-off for owners of NASCAR tracks (worth $78 million), a tax credit for companies operating in American Samoa (worth $62 million), rum tax rebates (worth $222 million) and accelerated depreciation for businesses located on Indian reservations (worth $222 million).
Some of our recent work at the Illinois Policy Institute exposes similar examples of cronyism in Illinois. The 2012 Illinois Piglet Book highlights nearly 200 examples of wasteful spending totaling more than $350 million dollars. Cronyism is the breeding ground in which much of this behavior is made possible.
Extending loopholes and special tax privileges in the tax code is a distortion, not a simplification. Breaking the backs of taxpayers to pad the coffers of corporations is a far cry from comprehensive tax reform. The ramifications of this cronyism will have long-term consequences.
The economic cost of this cronyism is easily in the billions. Thatís on top of the fact that economic freedom, growth and job creation are destroyed when lawmakers pick winners and losers on the taxpayersí dime.
And the cultural costs can be just as severe. The legitimacy of the political process is undermined when cronyism becomes a way to turn legislation into law. The result is a culture where favors and handouts are valued more than economic development. Thatís certainly not a path toward economic prosperity.