November 21, 2014

Extending Tax Breaks -- and Deficits

  • The nation's fiscal future depends on the balance between the spending in the federal budget and the revenues flowing into the treasury. Tax policy...

With Congress back in session, some lawmakers have unfortunately focused their attention on once again renewing a group of temporary tax provisions that subsidize certain businesses and other special interests.

The provisions -- known as “tax extenders” -- expired at the end of last year and ideally should be replaced with comprehensive tax reform rather than renewed. Even worse, lawmakers in both parties have shown little interest in paying for the extensions under pay-as-you-go (PAYGO) rules.

The House Ways and Means Committee passed bills last week to extend six provisions for businesses, including allowing multinational corporations to defer taxes on certain foreign profits. And the House legislation extends the tax breaks permanently rather than for two years, as Congress has usually done in the past.

The Joint Committee on Taxation (JCT) estimates the legislation will reduce revenues by $310 billion over the next decade.

It is disappointing that lawmakers seem to have abandoned the pursuit of comprehensive tax reform this year in favor of extending tax breaks for certain interest groups -- especially after Ways and Means Chairman Dave Camp (R-Mich.) released a wide-ranging tax reform proposal earlier in the year.

It is still more troubling that lawmakers have not bothered to find PAYGO offsets for the cost of extending these provisions. If Congress will not address the country's long-term budget challenges this year, it should at least not make the fiscal situation worse.