The rancorously debated "fiscal cliff" bill approved by Congress this week was supposed to be a straightforward way for the country to avert disaster, mostly by raising taxes on the wealthy.
But the 150-plus-page compromise legislation that passed the House and Senate is stuffed with corporate and individual tax breaks that have nothing to do with averting a fiscal dive. Inside it are billions of dollars in tax breaks for everyone from racetrack owners to Hollywood producers to California's alternative energy industry.
The recipients are, as the nonpartisan Sunlight Foundation put it Wednesday, "the sort of taxpayers who can spend millions on lobbyists and whose PACs (political action committees) and employees can give millions more to the campaigns of lawmakers."
Many of these tax breaks are frequently tacked on to unrelated, end-of-the-session legislation that must pass. Many would have died lonely legislative deaths if forced to a vote on their own merits, analysts said.
In the fiscal bill, they also served a raw political purpose as sweeteners - "a spoonful of sugar to help the legislative medicine go down," said Steve Ellis, vice president of Taxpayers for Common Sense, a nonpartisan federal budget watchdog. "This is log-rolling at its best.
"Certainly they are pork to somebody," Ellis said. "There's a reason why they're here. There is somebody behind them wanting to keep them alive."
Owners of motor sports tracks, thanks to heavy lobbying from NASCAR, caught an estimated $46 million tax break in 2013 by being able to write off the cost of their facilities over seven years instead of several times that long. Supporters of the break included Sen. Debbie Stabenow, D-Mich., and Rep. Vern Buchanan, R-Fla.
A break in Hollywood
Even though domestic movie-ticket sales hit a record $10.8 billion in 2012, Hollywood studios, where 75 percent of the filming is done in the United States, can continue to write off the first $15 million of their production costs, a break that has been around since 2004. The annual cost of this boon in 2013 is estimated to be $266 million.
The tax break for the entertainment industry was backed by corporate behemoths such as Disney and Time Warner and GOP Rep. David Dreier of San Dimas (Los Angeles County), who chaired the powerful House Rules Committee before retiring at the end of this congressional session, according to the Sunlight Foundation.
When such tax breaks are stuffed onto a seemingly unrelated piece of legislation, they are "not part of a deliberative process," said Tom Schatz, president of the nonpartisan watchdog Citizens Against Government Waste. "It's almost like (the recipients) are entitled to these tax breaks, because they're thrown in year after year. There's no discussion about the effectiveness or the necessities of these."
And while Congress has preached for months about wanting to simplify the tax code by reducing the tax rates and expanding the base, "this goes in the opposite direction," Ellis said. "This is more tax complexity. This is more carve-outs. Many of these had expired at the end of last year and we've resurrected them in this bill."
Powering an industry
To the American wind-power industry, the deal was a godsend. Few industries had as much at stake.
A tax credit that wind-farm developers use to finance their projects was due to expire at the end of 2012. Companies that make wind turbines and related equipment started firing workers as a result, anticipating that wind-farm construction would largely stop in 2013. The American Wind Energy Association counted 4,000 layoffs by November.
"They literally have scarcely any orders for next year," said Peter Kelley, the association's vice president of public affairs, speaking to The Chronicle in November. "That means we could see not just layoffs but plant closures. Once you lose that manufacturing base, it's hard to get back."
Since it was first offered in 1992, the tax credit has lapsed several times, only to be revived by Congress later. The last time it died, in 2003, wind-turbine installation plunged 76 percent the following year. The wind association estimated that half of the industry's 75,000 American workers could lose their jobs if Congress didn't extend the credit this time.
"There's 75,000 happy wind workers today," Kelley said Wednesday. "They're looking forward to going back to work, and we're going to be building a lot of wind farms this year."
The tax credit gives wind-farm developers $22 for every megawatt-hour of electricity their turbines generate, over 10 years.
The deal to avert the fiscal cliff also aided producers of advanced biofuels.
It extended a tax credit of $1.01 per gallon for companies that make cellulosic biofuels, derived from grass and woody plants rather than corn. It also broadened that credit to include companies - such as Solazyme in South San Francisco - that make fuel from algae.
Despite interest from both the federal government and private investors, advanced biofuels have so far failed to make the leap from small-scale production to the mass market.