Flake fights to expose special interest loopholes and prevent attacks on tax reform

The Treasury Department would be required to list every entity that receives federal tax credits online under a bill introduced on Tuesday by U.S. Sen. Jeff Flake (R-AZ) that takes aim at corporate and special interest groups that lobby against tax reform to protect their loopholes.

Under the Tax Expenditures Accountability Act, the Treasury Department would be required to post the names of entities receiving federal tax credits, as well as the type and dollar amount of subsidies that they’re receiving. The bill would align the disclosure of federal tax credits with all other forms of government expenditures.

“Congress cannot reform the tax code if we do not even know what loopholes there are, the cost of each and who they are benefiting,” Flake said. “Every tax give-away to one special interest represents a tax hike for everyone else, which Congress should be prepared to justify.”

Speaking on the Senate floor, Flake said more than 200 loopholes in the tax code add up to approximately $1.23 trillion in federal tax credits each year.

“This exceeds the total amount spent annually by the federal government for all discretionary programs, which includes defense, education, transportation, foreign aid and the environment,” Flake said. “These exemptions increase the bill for the average taxpayer. They also make the tax code so complicated that most individuals have to hire a professional tax preparer or buy software to help complete their tax returns. At more than 74,000 pages in length, no one — not even those in Washington who write the laws or enforce them — truly understands federal tax law.”

In April, Flake released a report titled, “Tax Rackets: Outlandish Loopholes to Lower Tax Liabilities” that outlines tax loopholes that benefit a small number of industries and groups.

Writing in an op-ed appearing in The Hill on Tuesday, Flake said, “I look forward to highlighting some of these loopholes for the waste that they in fact represent and working to ensure that tax reform gets passed even over the objections of Washington’s special interests.”

The complicated U.S. tax code hasn’t been updated in 30 years, putting strain on individuals and businesses, the senator said.

Special interest groups are taking advantage of the tax code’s complexity by hiring accountants to dodge taxes, he added.

“For example, developers are claiming $8 billion in tax credits every year supposedly to construct low-income housing. But with fewer homes being built and no basic accountability requirements, it is nearly impossible to track how the money is being spent,” he said.

Furthermore, yachts can be eligible for the mortgage interest deduction if the owner claims one as a second home, Flake said, while the wealthy can itemize the cost of gambling trips that include entertainment.

“Sunlight is the best disinfectant and I look forward to exposing many of these loopholes, eliminating them and returning the savings to individual taxpayers in the form of lower rates,” he said.