WASHINGTON (MarketWatch) -- The chicken-poop tax credit is pretty stupid, but it is nowhere near the only "stupid tax trick" legislators have pulled on Americans, an expert with the Tax Policy Center said Wednesday.
Section 45 of the tax code calls for tax credits for electricity produced from certain renewable resources, including poultry waste, as well as wood shavings, straw, rice hulls and other bedding material for the disposition of manure.
"It's got an environmental rationalization in that it's better to burn that stuff than let it seep into groundwater," said Len Burman, director of the Tax Policy Center, which organized the "Stupid Tax Tricks" forum in Washington.
However, the Environmental Protection Agency was already requiring chicken farmers to take similar actions, according to Burman, who served as deputy assistant secretary for tax analysis at the Treasury from 1998 to 2000.
"So it's just a pure windfall," he said. "Windfalls are very popular among lobbyists, but they make almost no sense as a matter of tax policy."
In addition to chicken poop, Burman also noted the stupidity of other tax items such as the alternative minimum tax -- "mind bogglingly stupid" -- and the clean-coal tax credit, which Burman said promotes coal over cleaner energies.
Edward Kleinbard, a partner with law firm Cleary Gottlieb Steen & Hamilton LLP, said "we're never going to have a completely optimal" tax system. "But we probably can all agree that we don't need five different tax credits for deductions for higher education subsidies," he said.
Kleinbard focuses on federal income taxes, including issues such as the taxation of new financial products. He added that it's important to separate individuals and businesses in tax discussions.
"Simplicity is a wonderful goal when you're dealing with the individual income tax," he said. "When you move to the world of business ... business can afford complexity, business relies on complexity.
"We can in fact learn to do it better for individuals. When it comes to business then what is required is a stiffer backbone and the resistance of special pleading."
Jason Furman, a senior fellow with the Brookings Institution, said there's "quite a rush now for doing social policy" through the tax code.
"For the people who want to do things through the tax code, it's incumbent upon them to do much more to make sure that we're doing them right," he said.
Furman suggested more transparency in the tax system that would get into the "finer details of what we do on the spending side."
Burman also cited these stupid tax tricks:
Education tax credits. "If you can figure out which one is most advantageous, you should be disqualified because you've already obviously gone to college."
Child tax credit. "We have a subsidy for children and if you're poor you don't get it. The people who need the most help get no benefit or little benefit from this policy."
Hurricane Katrina tax credits for New Orleans businesses. "Tax credit is worth nothing to them. They aren't going to have tax liability for a really long time."
Marginal well tax credit. "When prices gets too low, low producing oil wells get a tax subsidy. This is encouraging the production of oil from the most expensive sources when it's nearly worthless. Some people have called this kind of a policy the 'drain American first policy.' "
Mortgage interest deductions. "The people who get the biggest benefits are high income people with the largest mortgages who are in the highest tax brackets. The people who benefit from the maximum reduction buy bigger houses on bigger lots and it pushes up the prices for everybody else."
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