November 23, 2014

The Wrong Direction With Renewing Tax Extenders

  • 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...

Tax writers in the House and Senate are considering legislation to retroactively extend a number of tax provisions that expired at the end of last year. These provisions -- collectively known as “tax extenders” -- are temporary measures that, like other tax expenditures, essentially subsidize certain special interests.

Alternative energy producers, Puerto Rican rum producers, NASCAR race tracks and the owners of racehorses are just some of those who benefit from these provisions.

It is unfortunate that tax writers in both the House and the Senate are reviving the extenders just three months after letting them expire, which they did to generate momentum for comprehensive tax reform.

Now lawmakers are essentially admitting that they will not pursue such reform this year. Even worse is the movement towards extending these special provisions without paying for them. Instead, they would simply add to the deficit.

Last week the Senate Finance Committee, under the direction of its new chairman, Ron Wyden, marked up legislation extending nearly all of the expired provisions at a cost of $85 billion without offsets.

The mark-up itself was a display of fiscal irresponsibility and special-interest influence as provisions were added to the extenders legislation on an ad-hoc basis, reflecting senators’ preferences and lobbying from interest groups. There was little analysis of whether the provisions added back in would actually accomplish their stated purposes -- a test that most provisions have never had to meet.