Lawmakers are unfortunately focusing on renewing several expired tax provisions, mainly benefiting businesses, without offsetting the lost revenue.
Initially, lawmakers were negotiating a much larger deal that would have made several expired provisions permanent while extending many others for one year. This would have added more than $500 billion to the deficit over the next decade. The deal hit a snag when President Obama threatened to veto it, partly out of fiscal concerns but mostly because he thought the package was overly weighted in favor of business interests.
“These provisions — collectively known as ‘tax extenders’ — are temporary measures that, like other tax expenditures, essentially subsidize certain special interests or activities,” says Concord Coalition Executive Director Robert L. Bixby. “Making them permanent, or even just extending them again without offsetting the lost revenue, would be fiscally irresponsible.”
Any tax provision that decreases revenue should be offset by other tax code changes or spending cuts, Bixby writes in a new blog post. Unfortunately, lawmakers do not seem concerned with finding offsets, even though they are required under pay-as-you-go (PAYGO) rules.
“Congress has been wavering between a bad deal and a terrible one — a particularly sad situation when we remember that lawmakers were making significant progress on deficit reduction a few years ago,” Bixby says. “If they truly believe that these tax provisions are important enough to pass, they should consider them important enough to pay for as well.”
Estimates of Tax Expenditures for 2014-2018 (JCT)