Most Floridians know our nation's tax code is complicated, but few realize that all told, our tax code and its explanatory regulations run to about 75,000 pages — enough paper to cover more than five laps around the Daytona International Speedway.
A tax code that long can't truly be understood by any one person. To give you a sense of how complicated the tax code is, think about it this way: Americans will spend about 8.9 billion hours complying with it this year. That translates into about 4 million full-time jobs, or the equivalent of the total populations of Tampa, Jacksonville, Miami, Orlando and Tallahassee combined.
As the end of the year approaches, Congress has the chance to shorten and simplify the tax code. The best part about this is that it can be done with Congress doing absolutely nothing.
Last year, Congress looked at dozens of these special tax breaks and extended a number of them for only one year. These special carve-outs include credits to Hollywood, thoroughbred racehorse owners and rum makers. This month, if Congress does nothing, these special favors will go away.
Why do these special tax deals exist? Special interest groups spend untold amounts of time and money persuading Congress to give them a competitive edge. Oftentimes, those lobbyists will say they need them to create jobs and economic growth. But the reality is that the promises of jobs and economic growth are rarely kept, and taxpayers are the ones left holding the bill.
As with any type of reform in Washington, even one step forward could be more difficult than some might expect. While Floridians and the rest of America prepare their tables for holiday meals, special interest groups have sent their lobbyists to roam the marble halls of Congress to ask for just one more favor — often hoping their wish lists will remain hidden from public view.
Last year, for example, the tax extenders package was tucked into the incomprehensible 888-page omnibus. The year-end government funding effort, whether it culminates in an omnibus or a shorter stopgap measure, is often so opaque that even many members of Congress vote on the bills without actually knowing what is inside. Most taxpayers are even less familiar with the process — a fact not lost on Washington's well-connected interests.
Though some may argue that the cost of slipping last-minute tax favors to a select few is negligible compared to our almost $20 trillion national debt, the reality is that such measures carry a serious cost to our economic well-being. Specifically, temporary tax breaks add even more uncertainty and complexity to the tax code. The almost 200 tax expenditures are a major reason for this.
Tax extenders also create a number of unseen economic distortions. When government directs the allocation of capital, it routinely encourages more activity than would normally occur in a competitive market. Thus, rather than promoting fair and equal competition, these tax breaks result in special advantages for government-favored industries. Of course, when the government bets wrong, the economic consequences for ordinary Americans can be devastating. One need only study the recent housing market crisis or the failures of businesses like Solyndra to understand the problems government creates when it starts trying to pick the next winning investment.
Finally, and perhaps most important, these special carve-outs throw a wrench in our ability to address larger tax reform. If Congress can't put an end to carve-outs for Hollywood, racehorse owners and rum producers, how will it have the courage to address long-overdue comprehensive tax reform?
In recent years, many well-connected industries have stamped their influence on the laws Congress writes. This month, Congress has a golden opportunity to change the way business is done. It's time to finally put Floridians' and ordinary Americans' best interests above those of special interest lobbyists. It's time to start rooting out corporate welfare. It's time to clean up the code.
Dana Wade is a senior research fellow at the Charles Koch Institute. Her research and writing center on the need to stop cronyism and corporate welfare.