Closing Corporate Tax Loopholes Is Easier Said Than Done

Realistically, politicians have too much to lose

     

Other tax benefits are large and general: allowing deductions for certain types of research and product development. Subsidies that benefit the oil and gas industry are well-known. The tax code also encourages pharmaceutical companies to develop new drugs and advertise them. Even the video gaming industry gets special treatment. It is, in fact, one of the most highly subsidized businesses in the United States.

If you have ever been to a work-related “conference” at a swanky, warm-weather, golf-happy resort, you know the company that sent you did not pay full price. They wrote off the cost of that trip as a business expense. The same is true for long client lunches and entertainment.

Clearly, a lot of players have a big stake in maintaining the status quo. Legislators need to be able to reward companies in their states or districts. Tax benefits are among the most effective ways to do that.

Lobbyists make it their life’s work to ensure their clients receive the best possible treatment by the tax code. CEOs have to determine whether other countries will give them a new “break” that they can not get here in the United States. (For example, Canada also substantially subsidizes video game developers.) Whether it is encouraging companies to develop new products, explore new sources of energy, plan a conference or schmooze a client, corporations can write off these expenses at every turn.

So what would be the effects of a completely unbiased tax code, where every company paid taxes at the same rate and certain expenses were not also write-offs? It certainly would put a lot of accountants, tax attorneys, event planners and resort managers out of work. It also would radically reduce the power and reach of many lobbyists and congressmen. So for better or worse, the idea of closing all the loopholes will remain the stuff of campaigns — not legislation.

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