Federal Tax Code Says “Farming Good, Adult Movies Bad”

June 27, 2007

Forbes.com has a great piece today from AEI scholar Alan Viard regarding the central planning that goes on on Capitol Hill by some members of Congress. In summary, they use the tax code to give favorable treatment to those they like and in return impose higher taxes on those they don’t like. Sounds more like the old Soviet Union than the United States. From Viard’s piece entitled “Tax Pariahs: Oil, Gas And Adult Movies“:

What do oil and natural gas have in common with adult movies? If congressional Democrats have their way, more than you might think. Bills moving through Congress would put oil and gas production in a disfavored tax category, the same category to which adult movies have already been assigned.

This is the latest twist in a story that began back in 2004. Knowing it had to scrap export subsidies that had run afoul of World Trade Organization rules, Congress decided to replace them with an incentive for domestic production. An easy solution would have been an across-the-board tax reduction for all sectors of the economy. In every sector, after all, producers earn income by selling products that directly or indirectly meet consumer needs.

But Congress decided that some ways of meeting consumer needs were better than others. Manufacturing, construction, agriculture and movie production were good and deserved a tax break. Services, except certain architectural and engineering services, were bad and merited no tax relief. So Congress adopted a tax break for “qualified production” that reflected these distinctions. For activities that make the favored list, tax rates are effectively lower–for example, 32.9% rather than 35% this year.

Viard closes with a sad but true statement:

Congress may have thought it was striking a blow against obscenity when it denied the tax break to adult movies three years ago. But Congress’ own manipulation of the tax code has become the real obscenity.

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