David Brunori is the executive vice president of editorial operations at Tax Analysts and a contributing editor to State Tax Notes.
Brunori criticizes Congress and the president for ignoring the payroll tax cut during the fiscal cliff negotiations and instead including other items that benefited NASCAR and financial firms in New York.
Congress and the president thrashed it out over whether to raise taxes on relatively rich guys or relatively richer rich guys. The debate was fierce. And after all the haggling, threats, and cajoling, they managed to sock it to folks making more than $400,000. Of course, there was no deal on spending. Perhaps that debt thing is not as important as everyone keeps saying.
Curiously, there was no debate about payroll taxes going up on everyone. The payroll tax rate will rise from 4.2 percent to 6.2 percent. If you make $50,000 a year, your taxes will go up $1,000. If you make $100,000 your bill goes up about $2,000. The president promised he would not raise taxes on people making less than $250,000. He got a pass when he raised cigarette taxes on those people. Then he taxed those getting artificial suntans. And now he is taxing everyone who happens to work.
You would think that liberals would have been fighting to keep the payroll tax break. The tax is regressive and falls hardest on those least able to pay. But liberals in the Obama administration are not about helping the poor. They are about raising revenue to keep the government machine running. You might also think that conservatives would have fought to keep the payroll tax break. After all, they don't even like taxes. But they decided to let a patently unfair tax on people who actually work for a living go up.
There was not even serious support for extending the payroll tax break. It's funny because neither the Republicans nor the president argued about the $43 million tax giveaway to NASCAR. That's right -- the folks who run the country extended the seven-year recovery period for motor sports entertainment complex property. Perhaps it's appropriate. Stock car racing got its start in the United States when drivers ran bootleg whiskey during Prohibition. Even after Prohibition, the drivers ran homemade mash to avoid the "revenuers." NASCAR is privately owned and obviously contributes mightily to the richness of America. Without NASCAR there would no Richard or Dale. Grown men would not be making engine noises while watching racing on TV. The family that owns NASCAR (and I wish it were my family) makes billions of dollars a year, although precise numbers are unavailable. The tax break for NASCAR was so obviously necessary that neither the Democrats nor the Republicans even discussed it.
But it was not all about NASCAR fans. The politicians spent some money on environmentalists. They extended the tax credit for electric scooters. Now, you might think that electric scooter manufacturers are not as important as, say, working people making $50,000 a year. Again, you would be wrong. The electric scooter industry is very important. Eighty percent of Bruce Springsteen songs have an electric scooter reference. Guys are racing scooters, stealing scooters, driving around aimlessly on scooters, picking up girls named Mary and Wendy on scooters. Oh, wait, those weren't scooters; they were cars. Americans don't even want to drive scooters. I would like to say the scooter scam is about liberal do-gooders trying to tell us how to live. But in reality it's pure pork. All the scooter manufacturers are in Oregon, and the Oregon congressional delegation made sure that they got what they deserved.
You know what else was a lot like the payroll tax issue? The massive giveaway to Goldman Sachs, Bank of America, and other stewards of American finance. The president and Republicans decided to extend the tax-exempt financing for the New York Liberty Zone. This allows multibillion-dollar enterprises to receive a financing subsidy to invest in New York City. Our own David Cay Johnston wrote about this travesty in The Fine Print, in which he reported that Goldman received $1.6 billion. Goldman needs the money -- it had only $40 billion in revenue last year. It pays its officers and directors tens of millions in options every year. I think it is perfectly sane and reasonable that a program designed to help New York City in the aftermath of 9/11 should be used to enrich the richest people in the country.
You know what else was never debated? The $165-million-a-year tax credit for railroads. Like the payroll tax increase, the extension of these credits was unworthy of discussion. And like New York financiers and NASCAR executives, American politicians also love railroads. What's not to love? Let's take Union Pacific Railroad. It has about $16 billion in revenue and about $3 billion in profits every year. Obviously it needs a welfare check from you and me to make ends meet. There are other railroads, some bigger and some smaller, getting government handouts as well. You would think that before they gave millions of dollars to a profitable industry, our political leaders would hash out the pros and cons. You would be wrong.
There were other goodies for friends of politicians. The movie industry -- which happens to be making more money than ever -- received $150 million from special expensing rules. And who needs the money more than Hollywood? Box office sales for the movie industry in 2012 were $10.7 billion. The industry is hurting. Oh, wait, 2012 was a record year for sales.
Less glamorous but no less loved is the mining industry. Tax breaks for miners were included in the fiscal cliff package.
Lots of Republicans and lots of Democrats voted for these various forms of corporate cronyism. Most Americans don't know about it because the tax breaks were way under the radar. The press did a lousy job covering the issue. The nightly talk shows never mentioned it. You would think that corporate welfare would be an issue that both liberals (who hate giving anything to corporate America) and conservatives (who purportedly hate government interference in the markets) would agree on. But it didn't even warrant a discussion -- just like the expiring payroll tax breaks for people a lot less fortunate.