Cronyism in the tax code

Why is so much money spent on lobbying government? In a short video, Professor Randall G. Holcombe explains: “The reason you have so much lobbying and so much special interest activity in Congress is because government is so big. Government taxes a lot, government spends a lot, and so as a result there’s a lot of reward to people from going to Congress trying to get a piece of the action. Whether the piece of the action is a tax cut or a subsidy, I don’t think there’s any real solution to those special interest benefits outside of cutting the size of government.”

Holcombe also explained how tax law is formed: “If you really want to understand the nature of our tax code, don’t ask yourself ‘Why are these provisions in the public interest?’ That’s not how taxes are passed. Ask yourself ‘Who benefits from these taxes, and how much political power do they have?'”

This is not only a problem at the federal level. In Kansas last week special interest groups were able to extend using the Kansas tax code to funnel millions to special interests at the expense of the general public by extending the STAR bonds program.

In Wichita, a special interest group recently persuaded the city council to manipulate property tax law in their favor by forgiving property taxes to new home buyers, again at the expense of the general public.

I do have one disagreement with Holcombe when he says there are not groups that lobby Congress on behalf of the general public for tax reform. There are groups like Americans for Prosperity, Cato Institute, Tax Foundation, Americans for Tax Reform, Heritage Foundation, and many others that advocate for tax simplification and lower rates that benefit everyone. Not all these groups explicitly engage in lobbying, but they produce research and spread the message.


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