Some of the largest include the research-and-development tax credit, which will cost $14 billion over the next decade, and another for overseas income through “active financing” at a cost of $11 billion to taxpayers over the next year. Smaller credits include $14 million for mine-safety training and equipment.
A provision costing $222 million gives revenue from rum production in Puerto Rico and the U.S. Virgin Islands back to those territories, which use it to provide large subsidies to the industry. Auto racing and the biodiesel industry also benefited.
These provisions, known as “tax extenders” because most must be extended by Congress every year, help sweeten unpopular deals for lawmakers. It gives them a tangible benefit they can show constituents and provide a boon to lobbyists who charge clients to fight for them year in and year out.
“These are like the cockroaches of the policy world,” said Steve Ellis, vice president of the nonpartisan Taxpayers for Common Sense. “You think they’re dead and then they come back.”
The latest extension was initially approved last summer by the Senate Finance Committee and then sat around for months until the tax breaks were included in the fiscal-cliff package negotiated in the Senate. The measures have broad bipartisan support, but Republicans said Democrats insisted on keeping the entire package passed by the Finance Committee.
“The White House wanted the whole thing,” said Don Stewart, a spokesman for Sen. Mitch McConnell (R-Ky.), who represented his party in the deal.
The Obama administration did not respond to a request for comment.
“The bill is not perfect,” a Senate Democratic aide said. “There are some provisions that have greater value than others. . . . They will be reviewed along with the rest of the tax code later this year in comprehensive tax reform.”
More than 100 companies and organizations lobbied on the Senate bill, including General Motors, Time Warner and Coca-Cola, according to the nonpartisan Center for Responsive Politics.
Many of the same tax breaks were attached to the 2008 bank bailout after it was initially rejected in the House, encouraging lawmakers to give their support to the package. The last time many were extended was in a tax bill in 2010.
Often, one lawmaker will champion a particular provision benefiting a local industry. For example, Sen. Ron Wyden (D-Ore.) pushed for a tax break for electric scooters, getting them put back into the Finance Committee bill after they were removed last summer. The provision, which cost $7 million, simply matches subsidies that already go to electric cars, his office said.
“The incentives should be available to all vehicles, not just the ones that have the best lobbyist,” said Keith Chu, a spokesman for Wyden.
Wyden was turned on to the issue by two manufacturers of electric scooters who are based in Oregon, Chu said. When Wyden announced his success in restoring the provision last summer, he issued a news release quoting the chief executive of Brammo. “Right now, companies like Brammo in Oregon are keeping the American electric-vehicle industry on the cutting edge,” Wyden said. “But without an extension of this tax credit for the purchase of electric motorcycles, we could be stifling this innovative new industry in its infancy.”
The renewable-energy industry made out better than most, with $18 billion from taxpayers over the next two years. Wind power producers in particular did well, extending a tax break worth 2.2 cents on each kilowatt-hour of energy they produce from plants built this year, adding up to about $12 billion from taxpayers over the next decade. The subsidy has support from lawmakers in both parties because it aims to benefit the environment as well as rural areas.
A one-year extension of a special break for owners of auto-racing tracks will cost taxpayers $78 million. An industry executive said the provision, which has been used for decades, just matches the tax treatment given to owners of amusement parks.
“This is private-industry job creation,” said Charles Talbert, an executive with the International Speedway Corp. “The industry spends tens of millions of dollars annually and this is all on our nickel.”