The Senate is widely expected to approve a $42 billion, one-year renewal of over 50 tax breaks for certain businesses and other special interests without paying for them. The House approved the bill earlier this month and President Obama is expected to sign it.
It may be the season of giving, but this is fiscally irresponsible tax policy. Not offsetting the revenue lost from extending these provisions increases the deficit and ignores pay-as-you-go (PAYGO) principles.
But at least this will do less damage than some lawmakers’ earlier plans to permanently extend some of the tax breaks without offsets. That could have added over $500 billion to deficits over the next decade.
The House-passed bill retroactively extends the tax breaks — which expired at the end of 2013 — through 2014, so Congress will be considering this issue again in 2015.
Deciding tax policy on a short-term, ad-hoc basis like this creates uncertainty for taxpayers and creates inefficiencies in the tax code.
Congress should instead be focusing on a comprehensive overhaul of the tax code. All lawmakers are really offering this year is a lump of coal for future generations of Americans who will be saddled with more debt.