Editor’s note: Sen. Tom Coburn (R-Okla.) released a plan in July that he said would achieve $9 trillion in deficit savings over the next decade. We review parts of the proposal.
Coburn describes what he and others call tax expenditures as “little more than corporate welfare, designed to compensate for our country’s high tax rate.”
He traces them to “those companies and groups with close ties to lawmakers and access to the most experienced lobbyists.”
The result, he said, is that “small businesses and the middle class often bear the burden of the high standard tax rates while the wealthy and powerful receive a vast array of deductions, credits and other preferences created by Congress.”
But Coburn doesn’t put on his list the tax breaks for oil companies, corporate jets or hedge-fund managers that President Obama mentions. Instead, he focuses on some that have had only passing public mention or none at all.
Congress has already begun cutting some 180 federal programs that hand out taxpayer dollars to subsidize economic development initiatives, but never mentions similar programs that benefit from tax breaks. Coburn, however, goes after what he calls “a handful of tax subsidies [that] spend billions of dollars through the tax code for the very same purpose.”
One is the New Markets Tax Credit, which was designed to encourage investing in businesses that provide capital to low-income residents living in poor communities. Coburn points out that these tax breaks often went to multimillion-dollar companies. He cited a Wachovia Bank subsidiary that between 2004 and 2009 got $521 million in tax credits, and an additional $204 million in tax credits that went to two divisions of Chase Bank.
More credits from this program, $15.5 million, went to Prudential Financial, the nation’s second-largest life insurer, to subsidize the $116 million renovation of the Marriott Blackstone Hotel in Chicago.
Coburn provides a list of a dozen projects with credits worth $3.5 billion given in 2009 under this program that he says are “not seemingly intended to benefit low-income regions.”
These include an $8 million hockey arena, $4.9 million for an 86-room Fairfield Inn & Suites, and $10.7 million for a historic rehabilitation project for a global entertainment and convention venue management company.
Another Coburn target is a tax-free Tribal Economic Development Bond Program contained in the 2009 stimulus legislation. It allowed tribes to issue up to $30 million for economic development but, unlike past such efforts, the projects did not have to fulfill an “essential government function.” He pointed out that an Arizona tribe used bonds to build an 11,000-seat stadium for use as a spring training facility for the Colorado Rockies and Arizona Diamondbacks, other baseball fields, and a theater. All are located next to the tribe’s casino and golf course.
One Coburn target is similar to the president’s: the rich.
The senator from Oklahoma doesn’t call for doing away with the Bush tax cuts for those with incomes over $250,000. Instead he wants to go after tax provisions that benefit millionaire income-tax filers “instead of those most in need.”
His first examples are “individuals with over a million dollars in income [who] benefited from more than $7 billion in tax relief through mortgage interest deductions in one year alone.”
In 2008, according to Coburn, more than 18,000 people with incomes of $200,000 or more used “tax credits, deductions and other preferences to reduce their personal income tax liability to zero.”
One result, he said, was “the highest percentage of high-income taxpayers who avoided paying taxes since this [Internal Revenue Service] data collection began in 1977.”
Since tax revenues are not part of any short-term debt ceiling agreement, any changes like those Coburn proposes would have to await a revision of the tax code. But since bipartisan bills to eliminate tax breaks have been introduced in both houses of Congress, some may inevitably be approved.