Loopholes And Deficits Republicans have been complaining about deficits forever. This was their big chance to do something. Why didn't they?
NPR logo

Loopholes And Deficits

  • Download
  • <iframe src="https://www.npr.org/player/embed/568901525/568912452" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript
Loopholes And Deficits

Loopholes And Deficits

  • Download
  • <iframe src="https://www.npr.org/player/embed/568901525/568912452" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript

CARDIFF GARCIA, HOST:

I'm Cardiff Garcia.

STACEY VANEK SMITH, HOST:

And I'm Stacey Vanek Smith. This is THE INDICATOR from Planet Money.

GARCIA: A show about work, business and the economy.

VANEK SMITH: Planet Money started during the financial crisis. And we've always taken on these big projects. We've bought a toxic asset. We made a T-shirt. We are sending a satellite into space. We love this stuff, but it means we can't always keep up with the news as much as we'd like. So we're starting a new show. About three days a week five minutes per episode, it's THE INDICATOR, Planet Money's quick take on a number or a term or a story in the news.

(SOUNDBITE OF DROP ELECTRIC SONG "WAKING UP TO THE FIRE")

VANEK SMITH: When Republicans started their big tax push earlier this year, they said, OK, here's the plan. We are going to lower taxes for people and companies. And part of the way we're going to pay for it is by getting rid of loopholes and special deductions and all those dusty little perks hiding deep in the tax code. In November, the House passed a massive tax bill. And just last week, the Senate passed a slightly different bill. Now Republicans in Congress are hammering out the final bill. So did they reach their goal? Did they get rid of all the loopholes and special interest deductions, so they could cut taxes without raising the deficit?

(SOUNDBITE OF ARCHIVED RECORDING)

UNIDENTIFIED REPORTER: A new nonpartisan analysis out tonight shows that this plan could add up to a trillion dollars to the deficit.

VANEK SMITH: No, they didn't. Today's INDICATOR - one trillion dollars. That is how much the Republican tax bill is expected to add to the deficit over the next 10 years. And that is if you take into account economic growth. In the new tax bill, Congress not only decided to keep a lot of the old loopholes. They added some new ones, including a big win for a tiny island in the South Pacific. Today on the show, Republicans have been complaining about the deficit forever. This was their big chance to fix it. So why couldn't they?

(SOUNDBITE OF DROP ELECTRIC SONG "WAKING UP TO THE FIRE")

JOE BANKMAN: As soon as you talk about tax policy, people get turned off. I bet a lot of your listeners are turned off right now.

VANEK SMITH: You think people are actually just switching over to their Beyonce album right now?

BANKMAN: Well, they're telling themselves, I'm an NPR person. I can take this. But they're not going to enjoy the next few minutes.

(SOUNDBITE OF DROP ELECTRIC SONG "WAKING UP TO THE FIRE")

VANEK SMITH: Richard Rubin covers tax policy for the Wall Street Journal. For the past two months, he has pretty much been the busiest man in Washington.

Can I have - I don't know - 15 minutes, 10 minutes?

RICHARD RUBIN: Can I try and file this story and then do that? I don't have 10 to 15. Let me file this story. And I'll ping you right back.

VANEK SMITH: Perfect, OK. Sound good, bye.

RUBIN: All right, cool, bye.

VANEK SMITH: He did ping me right back. Crunch time for Richard started back in November when the House released its tax bill. And he got a copy and started reading through the 429 pages. And, of course, he sees the big headline things - big tax cuts for corporations and tax cuts for some people. And then he gets to page 412, and he sees something surprising.

RUBIN: A break that provides $10 million a year to StarKist, which has a tuna cannery in American Samoa.

VANEK SMITH: American Samoa - there were a bunch of others. And a few weeks later when the Senate bill came out, it had a lot of loopholes of its own.

RUBIN: The provision to allow faster write-offs for replanting of citrus trees.

VANEK SMITH: Citrus farmers in Florida have been struggling with this tree-killing disease for years. Rubin said the GOP really needed everybody's yes vote on the tax bill. It really wanted a win. So if you were a Republican congressman or congresswoman, and you wanted some perk or some program for your constituents, this bill was your big moment to get it.

RUBIN: The modern Congress doesn't do a lot of substantive legislation. They rename a lot of post offices. They do some must-pass spending bills. And then in between, there are a few major things that happen. And those things, you know, here in the Capitol, they're seen as freight trains. And everyone just tries to hitch a ride for as far as they can go because the chances that another one is going to happen and come along is pretty slim.

VANEK SMITH: Rubin says that's why these bills have all of these loopholes.

RUBIN: See, I don't like the word loopholes.

VANEK SMITH: Oh, OK.

RUBIN: In general, because I think of a loophole as something that's unintended - that Congress would write the law one way, and then companies or individuals or taxpayers find a way to exploit it. These are targeted incentives - targeted breaks, a lot of these things - that they're there on purpose to do particular things.

VANEK SMITH: For a long time, the tax code has been full of these targeted incentives - not just little obscure things for tuna canneries or orange farmers, but big deductions that a lot of us use - that we don't really think of as loopholes, things like tax breaks for retirement accounts and for people who get their health care through work. It's a way for the government to sort of spend money without saying it's spending money.

I mean, are people like hiding spending programs in the tax bill?

BANKMAN: Absolutely.

VANEK SMITH: Joe Bankman teaches tax law at Stanford.

BANKMAN: If we officially vote it, whether we wanted to give a subsidy for those orange growers, for example, we know what the answer is. It's probably no. But there are hundreds of subsidies like that in the tax bill that effectively we're voting on without even understanding that they exist.

VANEK SMITH: This stuff is so common. It's so well-known there is even a name for it. It's called spending through the tax code. Now, the Republican tax bills do cut some of the spending. For instance, right now, you can deduct state and local income taxes from your federal tax bill. That is largely going away. But when you step back and look at the big picture - how much these tax bills cut taxes, the loopholes that they get rid of versus the loopholes they keep and the ones they add - when you add that all up, what you get is negative $1 trillion over the next 10 years.

(SOUNDBITE OF DROP ELECTRIC SONG "WAKING UP TO THE FIRE")

VANEK SMITH: We'd love to hear what you think of the show. Or if you have any ideas for an INDICATOR, send us an email - indicator@npr.org.

(SOUNDBITE OF DROP ELECTRIC SONG "WAKING UP TO THE FIRE")

Copyright © 2017 NPR. All rights reserved. Visit our website terms of use and permissions pages at www.npr.org for further information.

NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.