October 23, 2014

Irresponsible Tax Breaks Run Into Trouble

  • 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...

Congressional gridlock has produced a rare positive result: Senate Republicans blocked a vote on irresponsible legislation that would have renewed dozens of expired tax expenditures without paying for them.

After a Senate vote failed to move the bill forward last week, House Republican leaders reportedly decided to delay further action on such provisions -- also known as "tax extenders" -- until at least June.

Some lawmakers in both parties as well as several conservative groups said renewing these provisions would only ensure that the code remains an inefficient system that favors certain special interests.

The Senate bill, the EXPIRE Act, would have renewed nearly all of the 55 expired provisions for two years. Violating pay-as-you-go (PAYGO) rules, this would have reduced federal revenues by an estimated $84 billion over that period.

Earlier this month the House -- in an even more egregious PAYGO violation -- approved a permanent extension of the research and development tax credit that would add $156 billion to the deficit over 10 years.

While the messy process on extenders has had a temporarily positive result for the budget, lawmakers could renew their push for them as early as this week -- or perhaps wait until after the fall elections to do so. In either case, Congress would not only be repeating past mistakes, but again delaying needed reforms to the tax code.