In this week’s InFocus podcast, I mentioned a post by Howard Gleckman on TAXVOX, which is the blog of the Urban Institute/Brookings Institution Tax Policy Center. Gleckman notes that there are a number of formally temporary provisions of the federal tax code which are de facto permanent because Congress regularly extends them.

The magic number for today is 16. That is, remarkably, the number of times Congress has extended the allegedly temporary research and experimentation tax credit since it was first enacted in 1981. The question for philosophy class (this is far beyond economics) is this: Can something that has been extended 16 times over 33 years still be temporary?

And while the R&E credit is far and away the most extended of extenders, it is hardly alone. My Tax Policy Center colleagues Lydia Austin and Eric Toder counted up the Top 10 ever-expiring business subsidies (measured by 2015-2019 revenue loss). And in an article first published in Tax Notes, they reported this: The work opportunity credit has been extended eight times since 1996, the exceptions to Subpart F rules that allow U.S multinationals to defer tax on certain foreign income have been extended seven times since 1998, and increased expensing for business equipment under Sec. 179 has been extended six times since 2002.

If you are a lobbyist, this history represents scalps on your belt (and client fees in your pocket). If you are a member of Congress, it is the gift that keeps on giving—countless Washington reps and their clients attending endless fundraisers, all filling your campaign coffers, election after election. …

Lawmakers, staffs, and lobbyists have figured out how to keep milking the cash cow. There are now five dozen temporary provisions, all of which need to be renewed every few years. To add to the drama, Congress often lets them expire so it can step in at the last minute to retroactively resurrect the seemingly lifeless subsidies.

It would be operatic, if it wasn’t so stupid.

Stupid, indeed.

Edward McCaffery (Professor of Law, Economics and Political Science at the University of California) and Linda Cohen (Professor of Economics and Law at the University of California, Irvine) lay out the theory of what is happening here in a 2006 article in the North Carolina Law Review titled “Shakedown at Gucci Gulch, The New Logic of Collective Action.” (A early version of the article is available from bepress here.) McCaffery and Cohen start with Mancur Olson:

Ever since Mancur Olson’s classic text, The Logic of Collective Action, was published in 1965—if not before—the dominant view of legislative action in the United States has given pride of place to “special interest groups.” In the now standard view of politics, these small groups with high stakes arise independently, motivated by common interests and able to solve the “free rider” problem of collective action on account of their small size. Special interests then descend on Washington and other bastions of power, in the guise of corporate lobbyists, and seek the non-market returns—goodies—that contemporary politics so amply provides.

But they turn the Olson analysis on its head:

In this article, we push the standard view of special-interest politics back to a stage prior to the formation of the groups. We argue that in a wide and important set of cases, lawmakers themselves, addicted to the money that special interests provide, actually proactively solve the problems of group formation. Lawmakers give birth to the very special interests that later “plague” them. Congress, our primary focus, through its powers— importantly including its taxing and agenda-setting powers—helps to create small interest groups with high stakes in the first instance, which it can then “shake down” for campaign contributions in the second instance. We sometimes call this the “reverse Mancur Olson” phenomenon—reverse because, in our conception, the politicians come first and the special interest groups second. Ironically, the groups thereby become the victims of the political process, the prey and not the predators.

The shakedown opera is coming Olympia: In 2013 the Legislature passed a bill (ESSB 5882) specifying that all new tax preferences automatically sunset after ten years unless the legislation establishing the preference explicitly states otherwise.