10 worst tax policies of 2013
Tax Vox proudly announces its seventh annual Lump of Coal Award for the worst tax and fiscal policies of 2013. The year was a curious mix of really bad ideas and dithering. After all, Congress鈥檚 finest moment may have been its December budget mini-deal鈥攁 decision that effectively ignored every one of听the great fiscal questions facing the nation. The winners of the 2013 Lump of Coal Award are:
10. The American Taxpayer Relief Act of 2013.听True, Congress and President Obama pulled the nation back from the听听on New Year鈥檚 Day. But they did it in a spectacularly ugly way. Lawmakers pulled the trigger on the mindless spending cuts called the sequester鈥攐nce thought to be too awful to contemplate. But that wasn鈥檛 all: ATRA also made permanent a massive tax cut for nearly everyone (except the very rich) that overwhelmed any deficit reduction from the sequester.
9. The Affordable Care Act鈥檚 Online Health Exchanges.听Those of us who have watched the IRS struggle for decades to upgrade its computer systems probably should not have been surprised at the fumbled roll-out of healthcare.gov. Except perhaps for the NSA, which may do tech a bit too well, the U.S. government just doesn鈥檛 do computers.
8. Tax Reform.听House Ways & Means Committee Chair Dave Camp (R-MI) and Senate Finance Committee Chair Max Baucus (D-MT) did a joint national tour to promote tax reform. Both released many provocative ideas for business reform. But neither would publicly say what individual tax preferences they鈥檇 eliminate or听. Neither President Obama nor congressional leaders of either party showed any enthusiasm for reform. And the year ended with Baucus preparing to resign his Senate seat to become ambassador to China.听
7. Phantom tax hikes.听Congressional Republicans rejected tax increases as part of the just-approved 2014 budget agreement. But they did agree to more than $30 billion in new revenues over the next 10 years. Calling them fees and premiums makes some lawmakers happy, but as my Tax Policy Center colleague Bob Williams听, why is it a tax when I pay a mandatory levy on gasoline but a fee when I pay a mandatory levy on an airline ticket to fund airport security? Oh, I know. The gas station guy doesn鈥檛 make me stand with my legs spread and my arms in the air when I get a fill-up.
6. The IRS Tea Party Scandal: It turned out the IRS听听in its reviews of requests by political groups for 501(c)(4) tax exempt status. It was merely bungling the job on a bipartisan basis. In fairness, the IRS is the last agency that should be asked to define acceptable political speech. The service has听听to sort all this out but they鈥檝e only generated more controversy.
5.听听(SUNY Tax-free Areas to Revitalize and Transform Upstate New York) gives businesses and their new employees ten years of tax breaks for opening on or near public college campuses. Under the plan,听听in October, both employers and new workers would be exempt from taxes.
Gov. Andrew Cuomo insists the subsidies will attract new businesses and notes the state received 800 applications by mid-November. But targeted tax cuts rarely create new businesses, they just move old ones around. And it is hard to understand how two sets of workers鈥攖hose who pay income taxes and those that don鈥檛鈥揷an work side-by-side.
4.听 The tax extenders. More than 60听听on December 31. Most are terrible policy. A few make sense. Congress makes no effort to distinguish which are which. It just mindlessly extends them鈥攁nd will probably do so again sometime in 2014. This uncertainty largely defeats whatever small benefit these subsidies have. The only real winners: The lobbyists and politicians for whom the perpetual prospect of expiration have become something of an annuity.
3. Internet sales taxes.听 In 1992, when shopping on the Web was still exotic, the U.S. Supreme Court said states generally could not collect taxes on mail order sales but practically begged Congress to sort out how states might. Six years later, Congress created a commission. Nothing happened. Last month, the听听states do have the right to collect taxes on many online transactions and again asked Congress to help set the rules. Maybe next year.
2. 听Immigration Pork. Ever wonder why Congress can鈥檛 balance the budget? Last spring, a bipartisan group of senators was scrambling to pass a bill that would create a 鈥減athway to citizenship鈥� for millions of undocumented people living in the U.S. Many lawmakers, especially from the southwest, were reluctant to support the measure. The sponsors added听鈥攂order agents, drones, fences and the like鈥攅ven though the net number of people crossing the U.S./Mexico border had already fallen to zero. The bill passed. Next year the House may take a whack at immigration. More pork will be distributed.
1. The government shutdown. The GOP shut down the government (twice) during Bill Clinton鈥檚 presidency and paid a huge political price. So why not do it again? Now, we hear that hard-line conservatives can鈥檛 wait to use the leverage of a debt limit breach to win concessions from the White House next spring. In the words of John Boehner, 鈥淎re you kidding me?鈥�
If 2013 is remembered for anything鈥攁nd perhaps it is best forgotten鈥攊t may be for all that didn鈥檛 happen. Here鈥檚 hoping 2014 is more productive. 听All the best from all of us at the Tax Policy Center for a good holiday season and a Happy New Year.
