Thanks to the surprising election of Donald Trump and the Republicans ability to hold both chambers of Congress, the reality of tax reform is a topic in Washington, DC that has been the focus of a number of events since the election. It has been thirty years since the Tax Code underwent real reform, and since 1986 it has only grown in length and complexity. Today the code is over 70,000 pages long and requires 8.9 billion hours of labor per year, at a cost to the economy of nearly $234.4 billion per year.
According to the Charles Koch Institute’s Dana Wade, a major reason for the growth in the length and complexity within the Tax Code is cronyism, or corporate welfare. It should be noted that not all tax deductions or exceptions are cronyism. The difficulty of dealing with this issues is determining what is a proper tax cut to mitigate bad tax policy, like doubling taxing, and what is cronyism. Their are some tax credits, like the Child Tax Credit or the Earned Income Tax Credit, that while some would argue should be eliminated, they are not cronyism.
The Mercatus Center has properly defined cronyism as “privileges that governments give to particular businesses and industries.” These privileges are usually granted because large industries and interest groups lobby the federal government for them. This explains why corporations spent $2.6 billion in lobbying expenditures in 2015.
Over the past 30 years industries and interest groups have convinced Congress to include special benefits and tax preferences within the Code just for them. In other words, tax rates for some businesses and special interests are not set in stone, but are ultimately dependent on how well they can lobby the government for special favors. This has been especially advantageous for larger or prosperous businesses and well-connected special interest groups, but harmful to smaller and less influential businesses and interest.
Read the rest National Taxpayers Union Foundation.
