Tax Breaks for Celebrities, Luxury Goods, Gambling Losses Cost Gov Billions
Oklahoma Republican Sen. Tom Coburn released his latest report chronicling government waste on Tuesday, highlighting giveaways littered throughout the tax code.
In a press release, Coburn said that the report, titled “Tax Decoder,” reveals “more than 165 tax expenditures worth over $900 billion this year and more than $5 trillion over the next five years.” (RELATED: Coburn Identifies $345 Million in Corporate Subsidies)
“As a result of all of these loopholes and giveaways,” Coburn says, “nearly half of American households pay no federal individual income tax, including over a thousand with an adjusted gross income of $1 million.”
Among the giveaways identified in the report are deductions for gambling losses, credits for movie producers, shelters for the rich and famous, and even deductions for sports team owners who claim that their players’ skills depreciate as they age.
“The real beneficiaries of many tax giveaways end up being not the intended recipients who need relief, but those who are already well-off,” Coburn says, adding that, “Taxes should not be determined by who has access to the craftiest accountants, lobbyists, and politicians.”
“Ideally,” Coburn argues, “Congress would throw out the entire tax code and start over, but at the very least the code should be made simpler, fairer, and flatter,”just as members of both parties have been promising to do for years.
Despite such rhetoric, Coburn asserts that Washington politicians tend to become hesitant when faced with cutting specific tax expenditures, because “the tax code has become a powerful and elaborate system of rewards and punishments used to coerce Americans and manipulate the economy.” (RELATED: Reagan Budget Chief: Crony Capitalism ‘Thoroughly Embedded’ in Washington)
Should lawmakers decide to take serious action on tax reform by eliminating loopholes and lowering rates, though, Coburn says his report “provides a list of options for Congress to streamline and simplify the tax code to achieve that goal.”
Some of the most egregious tax expenditures identified in the report, and therefore the lowest-hanging fruit for Congress, are those awarded to millionaires, businesses, and celebrities.
“From deductions for yachts and second homes to tax credits for purchasing luxury cars, and write-offs for gambling losses, the tax code is spending billions of dollars subsidizing the upscale lifestyles of the well-off,” Coburn claims.
Deductions for gambling losses alone totaled $4.8 billion in 2009, while “nearly 9,000 millionaires claimed a total of $67.7 million in residential energy credits in 2012,” some of which were even used to upgrade vacation homes.
Additionally, “of the approximately $1 trillion in tax expenditures in the code, an estimated $148 billion will be directed toward corporations in FY 2014,” even though the total corporate tax bill for 2014 is estimated to be only $321 billion. (RELATED: GAO: Corporations Saving $181 Billion Through Tax Breaks)
Facebook, for example, “reported a combined $429 million refund from their federal and state tax filings” in 2012, allowing them to virtually eliminate their tax bill for that year. And while Facebook may be an extreme example, Coburn says that abuse of the business expense deduction is “rampant” throughout the corporate world.
In one case cited in the report, an individual attempted to deduct the salary of his rental-property manager, who also happened to be his live-in girlfriend. In another, a couple tried to write off the cost of traveling to their rental condo aboard a private plane by saying they were “monitoring” the property.
The report also claims that many celebrity-run charities give little to the causes they ostensibly represent while lining the pockets of their already-wealthy owners, citing the example of the Wyclef Jean Foundation, which “paid the singer $100,000 in 2006 to perform at his own benefit concert.”
“The charitable deduction was intended to encourage generosity for causes like education and medical research,” Coburn points out, but “is instead subsidizing donations that support the lavish lifestyles of Hollywood elites at the expense of U.S. taxpayers.”
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