Americans for Tax Reform approved tax code boondoggles 

Following up on our Tuesday editorial on why Americans for Tax Reform needs to update their Taxpayer Protection Pledge, The Washington Post has a story today on how the paper industry continues to score millions in benefits by taking advantage of “black liquor” tax credits.

Read WaPo’s full story but the short version is this: the 2005 highway bill contained a biofuel tax credit that paper companies could take advantage of by using black liquor (a by product of the wood-pulping process) as fuel. Congress then ended the credit and used the proceeds to help pay for Obamacare. But then the IRS ruled last year that a separate law, the 2008 farm bill, also contained a biofuel tax credit that allowed paper companies to continue claiming a tax benefit by using black liquor. Paper companies added hundreds of millions of dollars to their bottom lines in 2010 by using this credit.

What does this all have to do with ATR’s pledge? The 2005 highway bill passed the House 412-8 and the Senate 91-4. That means all Republicans currently in the House and Senate who signed the Pledge voted for the first black liquor tax credit (notable exception include Reps. John Boenher, Jeff Flake, Jeb Hensarling, Ed Royce, Jim Sensenbrenner, and Mac Thornberry and Sens. Jon Cornyn, Judd Gregg, Jon Kyl, and John McCain). The 2008 farm bill passed by closer margins, but 100 House Republicans and 33 Senate Republicans voted for the second black liquor tax credit as well. Virtually all of them signed the ATR pledge. ATR never admonished any of them for these votes.

Again, tax credits like this one may help make net taxes lower. But they also undermine real tax reform and are antithetical to ATR’s full mission which they claim is “a system in which taxes are simpler, flatter, more visible, and lower than they are today.”

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