Closing loop-holes, aka taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. expenditures, has bipartisan appeal. This is because it is difficult to deny the common sense notion that tax expenditures add unnecessary complexity and compliance costs to the tax code, while benefitting a select few at the expense of the many.
On Monday, the President attempted to appeal to such common sense by recommending his jobs plan be covered in part by closing certain loop-holes, in certain ways, for certain groups of people only.
Sound complicated? Well, it is. 155 pages of legislative language and 41 pages of section-by-section analysis indicate that the American Jobs Act would close the industry specific loopholes for exactly two industries: oil and gas, and corporate jets. Additionally, it would carve out a loophole within a loophole by disallowing use of the manufacturing deduction for the oil and gas industry.
In the personal income tax code, it would “limit the value of all itemized deductions and certain other tax expenditures for high-income taxpayers by limiting the tax value of otherwise allowable deductions and exclusions to 28 percent,” where high-income is more than $200,000 for singles or $250,000 for married couples. That is, it would leave all loopholes on the books and complicate them further with these income conditions.
If the purpose is to clean up the tax code, simplify it, and make it more neutral and fair across groups, the American Jobs Act is an abysmal failure. Worse, these things are means to an end, i.e. simplicity and fairness in the tax code are good for job creation, the purported ultimate goal of this legislation. As I described last week, the “job creation” part of this legislation is poorly designed and suffers from the same arcane, legalistic, top-down, micro-management approach. Small business men and women simply don’t have the time to bother with such provisions, many of which only last a year anyway.
As far as I can tell, the only jobs created by the American Jobs Act are all the budget wonks, politicians, lawyers, accountants, and economists who have labored to put this thing together and/or labored to understand it. Meanwhile, 14 million Americans remain out of work.Share