Jon Stewart’s Fake News on Tax Expenditures

Dear Jon,

The Daily Show is my favorite TV show.  I think you’re the smartest policy analyst on television.  (Okay, as you prove time after time, that’s a really low bar, but, seriously, you’re brilliant.)

Last month, however, your satire missed the mark.  You had a lot of fun with President Obama’s pledge to make “spending reductions in the tax code”:

What???  The tax code isn’t where we spend.  It’s where we collect. … You managed to talk about a tax hike as a spending reduction.  Can we afford that and the royalty checks you’ll have to send to George Orwell?

Jon, meet me at camera 3.

I know you say it’s fake news, but when you riff on policy, people take you seriously.  And, with respect, in this case, you don’t know what the hell you’re talking about.

For 40 years, tax geeks like me have been trying to explain that there’s a boatload of spending programs masquerading as tax cuts, and they’re multiplying.  Their number increased by almost 60 percent between 1987 and 2007.

The fact that pols can claim credit for “tax cuts” (good) rather than “spending” (bad) has made them irresistible to legislators of both parties. Never mind that the IRS doesn’t have the budget or expertise to effectively administer a couple hundred spending programs (sorry, tax cuts) or that many of them make no sense.  The tax code’s cluttered with this junk.

Finally we get the president of the United States to acknowledge this and you drill him a new one.

You don’t believe there’s spending in the tax code???  Here’s a real life example:  the chicken-s**t tax credit.  Really, section 45 of the Internal Revenue Code.  You can look it up.  The late Senator Roth of Delaware (home of lots of chickens and “poultry manure,” as it’s euphemistically called) put this little goody into our tax laws.  Here’s the backstory:  the EPA said that enormous chicken farms could no longer put their poultry waste in pools or bury it because it poisoned the ground water.  One of the best options to meet the new requirement was to dry the vile effluent and burn it to make electricity, but that was still costly.  Roth didn’t want chicken farmer profits to plummet or chicken and egg prices to rise just because farmers couldn’t use the earth as a giant toilet, so he pushed through the chicken s**t tax credit to create a profitable market for that (as well as all sorts of other crap).

There are lots of chicken s**t tax subsidies.  The mortgage interest deduction is basically a housing voucher for rich people.  Those who really need help get bupkes.  The tax-free health insurance you get at work is heavily subsidized by the tax code, but those with low incomes rarely get health coverage and, if they do, the subsidy is worth little or nothing.  The ethanol tax credit is a farm price support program  that is literally starving people.

It’s spending, Jon.  Often really dumb spending.  And when we’re talking about cutting food stamps, nutrition programs for mothers and infants, and environmental protections to save money, those spending programs in the tax code should be on the table too.

Tax subsidies add up to more than $1 trillion per year.  That’s not chump change, but, until recently, it’s been off limits in any bipartisan budget negotiations in Congress because Republicans have been unwilling to consider anything that might be labeled a tax increase.

But there’s a glimmer of hope.  The president, his bipartisan debt commission, the bipartisan Domenici-Rivlin task force  that I served on, and even Paul Ryan want to slash tax subsidies.  Arch-conservative Oklahoma Senator Tom Coburn, leader of the bipartisan “gang of six,” has said that he’d support tax increases so long as they didn’t include rate increases.  That is, he wants to rein in subsidy programs run by the IRS.

This is important.  Coburn was willing to take on Grover Norquist, who has very effectively prevented any sensible compromise on the budget by insisting that cutting tax subsidies would violate the taxpayer protection pledge that he strong-armed most Republicans to sign.  Now Grover can use your laugh line to reinforce Republican intransigence and doom any chance of bipartisan cooperation.

In all seriousness, Jon, this is not helpful.

With respect,

Len Burman

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Len Burman is the Daniel Patrick Moynihan Professor of Public Affairs at the Maxwell School of Syracuse University, an affiliated scholar at the Urban Institute, and a cofounder and former director of the Tax Policy Center.