Is poultry poop worth a tax credit? Should yacht owners get a break? Is the beer tax too high?
You might think capital gains and the so-called marriage penalty are the tax issues that preoccupy our elected officials. But dig into pending tax legislation and you'll find what really drives tax policy: parochial issues.
In support of their constituents, our representatives have introduced a variety of narrowly focused tax bills that, if enacted, would add further to the existing bulk and complexity of the tax code. So much for simplification.
But hey, "that's what representative government is all about," says Steve Woolf, director of tax policy at
Here's a look a few of those proposals:
Sen. William Roth (R.,Del.), powerful chairman of the
Senate Finance Committee
, has introduced the
Poultry Electric Energy Power Act
, or PEEP Act, which among other things would give electricity power plants a tax credit if they use poultry waste to create energy.
Britain has had success with generating power this way, using up half of that nation's poultry manure to provide enough electricity for 37,000 homes.
"There are no waste products created through this process," said Roth in making the proposal. He calls poultry manure an "environmentally friendly fertilizer."
Wonder why Roth, the man who brought us innovative new ways to invest our IRA assets, is promoting this bill? The eastern shores of Maryland, Virginia and Delaware are some of the largest chicken production areas in the U.S.
Pennsylvania is home of many beermakers, including
, touted as "America's oldest brewery" and
. It's no wonder that Rep. Phil English (R., Pa.) introduced a bill that would reduce the excise tax on beer by 50%.
Back in 1991, the federal beer tax was doubled to its current level of $18 on every 31-gallon barrel. English would like to cut it back to $9.
Currently, the tax breaks down to about 58 cents per gallon. If you figure a six-pack is just over half a gallon, you're paying about 30 cents tax for that six-pack. That could add up pretty quickly for a big beer drinker. A 50% reduction might actually make a difference.
English believes the high tax has stopped people from buying beer over the years. The tax has had "continued far-reaching effects, including the loss of as many as 50,000 industry jobs," English said when introducing the bill.
No surprise that one of the bill's co-sponsors is Rep. Scott McInnis of Colorado, home of
This is the kind of tax cut that could actually slip through as part of a bigger tax bill, says Woolf. "It's the Christmas tree story: You're just putting more ornaments on the tree."
On the flip side, Sen. Strom Thurmond (R., S.C.) wants to hike the wine tax and put the additional proceeds into alcohol abuse programs.
"Wine is currently taxed at a rate slightly lower than beer and significantly lower than distilled spirits. Like distilled spirits, wine is consumed by more prosperous taxpayers, so it is reasonable that wine should be taxed at a rate similar to distilled spirits," says Thurmond.
What he might be saying is that tobacco production, his state's livelihood, is taking a serious beating, so he wants alcohol to share the pain. Besides, 90% of all wine production is in California, which has nearly 1,200 wineries. There are only five wineries in South Carolina.
Whatever Floats Your Yacht
Just what hardworking Americans need: a credit on their yachts.
Rep. Patrick J. Kennedy (D., R.I.) has introduced a bill that will offer a 20% credit on yacht purchases. The proposed credit can't exceed $2 million for any one yacht, but you could take full advantage of the law by buying a yacht priced $10 million or less.
In 1991, a 10% luxury tax was imposed on yachts costing more than $100,000. That was in addition to sales tax. The luxury tax was repealed in 1993, but by that point, the "yacht industry really went to the tank," says Woolf. So Kennedy's intent is to once again encourage yacht production.
Plane Truth on Takeoff Taxes
Here's some Alaskan trivia for you. You got a $1,500 oil royalties dividend check for 1998 if you were one of the 606,000 residents of the third least-populous state. Yes, the oil-rich state gives you cash just for calling Alaska home. But apparently that's not enough.
The state's junior senator, Frank Murkowski, is fighting to get Alaska (and Hawaii) excused from the airline ticket tax. The argument: It is much harder to get a direct flight from Anchorage or Maui than it is from New York or Los Angeles
Currently, there is a $3-per-flight-segment tax on your airline ticket. "This is unfair for Alaskans and Hawaiians because it adversely affects passengers in rural areas that often must fly on flights that make a number of stops, more greatly affecting passengers than those who can fly on nonstop flights," said Murkowski at a recent Senate Finance Committee meeting.
A traveler from Seattle to Anchorage could make as many as seven stops, thus paying $21 in fees on a trip, while a passenger flying nonstop pays only one $3 fee, according to Murkowski.
Caddies' Sugar Daddy
Rep. Dan Burton (R., Ind.) couldn't wait to get back from the holiday break to introduce this one. On Jan. 6, he proposed the
Caddie Relief Act of 1999
to allow golf caddies to be treated as independent contractors -- not employees -- for tax purposes.
At a minimum, this bill will benefit the owners of the 467 golf courses in Burton's state who no longer would have to pay employment tax for their caddies. The state ranks 12th in the U.S. for number of golf courses and has an above-average number of residents involved in the sport, according to the
National Golf Foundation
in Jupiter, Fla.
Better yet, caddies will be able nurture their entrepreneurial streaks if this bill passes. They'll be treated as self-employed individuals for tax purposes and will be able to deduct all business-related expenses. But they won't be eligible for unemployment compensation if the work dries up.
Rep. Philip M. Crane (R., Ill.) has introduced the
Printed Circuit Investment Act of 1999
, which would allow manufacturers of printed wiring boards and printed wiring assemblies to depreciate their production equipment over three years rather than five as under current law.
These wiring boards are the nerve centers of everything from television sets to computers to cellular phones, Crane said when introducing his bill.
There is some logic to this proposal. When you depreciate an asset, you deduct a portion of the asset's value as an expense each year until the asset is worthless. That expense reduces the total net income, thereby reducing the amount of taxes due at year-end. The more you can depreciate an asset in a year, the better, tax-wise.
Currently, one-fifth of a printed wire board can be deducted as an expense each year, even though the product is obsolete in three years. It's like charging dinner on your
card. You've already digested the meal, yet six months later, it's still on your bill.
But your PC is depreciated over three years. So your PC is worthless after three years, even though the printed wiring board lasts, in theory, for two more.
Crane is attempting to accelerate the depreciation process, and it's something that will probably get passed, says Woolf.
It seems like a bizarre product to fight for -- until you realize that technology giant
is headquartered in Crane's district.
What's the strangest tax you've encountered? Send me an
email and let me know.