Skepticism Needed on Extending Tax Breaks

Blog Post
Monday, May 20, 2019

Although the tax filing season is over, the Senate Finance Committee seems intent on resurrecting the question of whether to extend certain tax breaks -- known as “extenders” -- that expired well over a year ago.

That’s unfortunate. As the nonpartisan Concord Coalition and an array of other organizations from across the political spectrum explained in a letter to congressional leaders earlier this month: “Bringing back these temporary tax giveaways, particularly on a retroactive basis after most Americans have already filed their taxes, is bad tax, fiscal and economic policy.” The letter called these “zombie extenders.”

On Thursday, however, Senate Finance Committee Chairman Charles E. Grassley (R-Iowa) and ranking member Ron Wyden (D-Ore.) announced the creation of five “task forces” to take another look at the 26 tax breaks that expired at the end of 2017 as well as three more that expired at the end of 2018 and 13 that are set to expire at the end of this year.

Concord has long opposed such tax provisions, which favor certain taxpayers, companies, industries and activities over others. These are essentially spending subsidies administered through the tax code, resulting in lost government revenue and higher federal deficits. At a minimum, any extension of these tax breaks should be paid for.

Grassley said the task forces would be assigned to focus on the extenders in various policy areas and complete their work by the end of June.

He said the groups could recommend reducing, phasing out or eliminating certain tax breaks. But he also raised the possibility that the task forces could identify provisions “that should be extended without reform.”

Within this last category, Grassley suggested, some short-term provisions should be continued on a longer-term basis or simply be made permanent. He also made it clear that he wants to see the tax breaks that expired in 2017 resurrected, framing the situation as an unfair and inconvenient delay for those taxpayers who had hoped their tax breaks would be extended.

“Unfortunately,” he said, “we’re still waiting on House Democrats to send us a tax bill that includes those provisions so taxpayers who’ve relied on an extension can finish their 2018 tax returns.”

Grassley also says “we shouldn’t wait any longer to start laying the groundwork to deal with all of these temporary tax policies as permanently as possible.”

It seems, however, as if we’ve been here before. As the letter from Concord and other organizations to congressional leaders pointed out, both parties agreed to end these provisions under the PATH Act of 2015.

That legislation made some temporary tax provisions permanent but was supposed to put “an end to the repeated tax extenders exercise,” according to Orrin Hatch, a Utah Republican who was then chairman of the Senate Finance Committee.

So the committee’s task forces should approach their assignments with a healthy dose of skepticism about the special tax provisions in question, particularly those that Congress has already allowed to expire. They increase government borrowing and undermine the public credibility of the tax code.

Elected officials who want to extend special deals for some taxpayers could better spend their time on broad reforms to make the tax code simpler, more efficient and more even-handed.