Senate Finance Revives Costly Tax Breaks

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Like zombies, more than 50 expired tax provisions came back from the dead last week when the Senate Finance Committee voted overwhelmingly to renew them for this year and next — without paying for them.

The Joint Committee on Taxation projects this would decrease government revenue by $170 billion over the next two years.

These provisions, known as “tax extenders,” essentially subsidize certain taxpayers and activities. When lawmakers have periodically renewed them, they have usually failed to offset the lost revenue. They were last extended in December for 2014.

Failing to pay for renewing these provisions increases the deficit and blatantly violates pay-as-you-go rules. Renewal this late in the year also subverts the stated purpose of the extenders, which is to encourage certain behaviors, not retroactively reward actions that have already taken place.

Earlier this year, House lawmakers voted to make a few of these extenders permanent, also without offsetting the cost.

Ideally, lawmakers should be pursuing a comprehensive reform of the tax code that would eliminate many such provisions. This would simplify the tax system, make it more fair and enhance economic growth. But if lawmakers insist on renewing the extenders, they should at least ensure that they don’t add to the deficit.

External links:
Cost Estimate of Senate Legislation (JCT)

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