How Both Parties Abuse Federal Tax Law

There is one constant in official Washington that transcends political parties and ideologies: incumbents can't stop messing with the tax code.

All that fiddling has made the code far too complex for the average taxpayer to comprehend. But for politicians, the code itself isn't the problem, but an opportunity – to hand out favors to this, that and the other interest groups. Even when those favors make absolutely no sense.

Consider an example former Sen. Max Baucus, D-Mont., who wrote in The Wall Street Journal:

U.S. taxpayers have been subsidizing the production of cherry vodka and orange maple whiskey for no apparent reason. The Section 5010 tax credit is an example of the innumerable special-interest credits and deductions that litter our tax code. It provides a benefit to distillers who blend spirits products with wine and alcoholic “flavorings.”

That helps explain the welter of flavored liquor on the market. But why this specific subsidy? What was the rationale behind it?

Wine and liquor suppliers advocated the passage of 5010 in the early 1980s, but the rationale for giving preferential treatment to flavored liquor is lost to history. The credit is primarily used by large foreign liquor manufacturers, so the money isn't going back into the U.S. economy or creating American jobs. No data suggest this credit is useful for American small businesses.

The 5010 credit also lacks transparency. The Treasury hasn't conducted public audits or equipped taxpayers with the tools necessary to determine whether the credit is actually being used appropriately.

“Lost to history” is a blinking red light that this carve-out needs to go. And it's very likely not the only item in the tax code that's alive and well…and no one knows why it's there or what it was originally supposed to do.

The opinions expressed in this article are those of the author and do not necessarily reflect the positions of American Liberty News.

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