by William Freeland, Ben Wilterdink, Jonathan Williams
American Legislative Exchange Council
July 25, 2014
Specialized carve-outs in the tax code are distortionary and ineffective at best, and examples of government cronyism at worst. These carve-outs run contrary to the principles of sound tax policy and the basic fairness of a level playing field for all businesses to compete. Every state has these types of carve-outs in their tax codes to some degree, meaning that every state economy is held back, at least to some extent, from achieving their true potential for economic growth. Identifying and limiting specialized carve-outs in the tax code is an important policy tool that lawmakers can use to make their business climate more fair and ultimately grow their state’s economy without arbitrarily favoring one business or industry over others. Additionally, identifying tax carve-outs for elimination can be the golden ticket to fundamental tax reform.