Coburn’s ‘Wastebook’ Blasts Tax Breaks, ‘Outlandish’ Federal Programs

By Kerry Young, CQ Staff

In a new sign of how difficult it will be for Congress to settle on a grand budget bargain, a member of the Gang of Eight senators issued a new report on what he calls federal “waste” that includes a tax break for paper companies that has been defended by another member of the group, which is working to create a bipartisan spending agreement.

Tom Coburn, R-Okla., says in the report to be issued Tuesday that the “black liquor” credit, allowed for a by-product of making pulp and paper, is a “ bonanza” for certain companies. The credit will cost taxpayers $1.3 billion over four years, Coburn said, citing data from the Senate Finance Committee, which attempted to change the tax policy in connection with the highway bill (PL 112-102).

“However, senators with state parochial interests were able to kill the proposal,” Coburn says in his “Wastebook.” Among the defenders of the current black liquor tax policy has been Michael D. Crapo of Idaho, whose credentials as a budget hawk rival Coburn’s reputation. The two conservative Republicans serve together on the Finance Committee, and both are members of the bipartisan group of senators that has been working for months to pull together viable ideas for reducing the deficit.

Before that, Coburn and Crapo were among the Republicans who served on the Simpson-Bowles deficit reduction commission in 2010.

Crapo this year successfully opposed Senate Finance Chairman Max Baucus’ plan to end to the black liquor tax credit carryover as a potential offset for the highway bill. In his report, Coburn said Congress began to exclude black liquor produced after 2009 from tax credits, but paper companies still can claim a credit for product produced earlier.

“To claim their bounty, companies have been carrying forward the tax credit and are expected to do so until 2016,” Coburn said in the report.

This is Coburn’s third annual Wastebook, a compendium of what he says are “outdated and outlandish” projects that continue to get funding while the deficit grows and deserving programs are slashed.

These volumes are meant to draw attention to cases of potential wasteful spending that have been raised earlier through research done by inspectors general, watchdog groups and news reports. The black liquor credit is one of the big-ticket items among the 100 tax credits and projects listed for possible termination in the 2013 edition of the report. Another is the potential savings to be gained by cracking down on identity theft causing fraudulent tax return payments. Treasury’s inspector general for tax administration has estimated that $21 billion could be lost this way in the next five years.

Coburn also includes scores of smaller examples of what he deems wasteful spending. One cites a report from the inspector general for the U.S. Agency for International Development regarding a $27 million project to train Moroccans to create and design pottery to sell in local and international markets. Coburn noted there were flaws with translation that hindered the transmission of lessons, and that the program uses dyes and clays not available in Morocco for purchase.

Beyond the seemingly failed execution, Coburn raised question in his report about the need for the program.

“Moroccans have been making pottery since at least the fifth century B.C., with the earliest urban pottery made after 800 A.D.,” Coburn said in the report. “Perhaps USAID could learn a thing or two about pottery making from Moroccans who have been passing knowledge of the ancient craft from one generation to another for centuries.”

Coburn even trained his sights on congressional operations, criticizing the light workloads at various committees, such as the Senate’s Special Committee on Aging. That panel “reported out a single measure, which was to provide for its own budget, and held just nine hearings” in the past year, Coburn’s report said.