WASHINGTON DC (March 12, 2019) — It feels like Washington just can’t kick its addiction to special interest tax breaks.
Nearly 15 months after the expiration of the so-called “tax extenders,” The House is holding a subcommittee hearing Tuesday on these provisions. Senate Finance Committee leaders, meanwhile, have already proposed legislation to bring expired provisions back — and do so retroactively for last year.
For years, Washington has resorted to making tax policy one or two years at a time, allowing harmful temporary tax provisions to expire, only to resurrect them in a seemingly endless cycle. That cycle must end; it is time to break this addiction once and for all.
This isn’t just our opinion, but that of a wide array of tax and policy experts from across the political spectrum. Last year, Americans for Prosperity and the Committee for a Responsible Federal Budget joined with Heritage Action, the Institute on Taxation and Economic Policy, the Economic Policy Institute, Freedom Partners, and US PIRG in a letter urging “support for ending the practice of temporary 'tax extenders' once and for all.”
Our groups span the ideological continuum and disagree on many policy issues. We even differed on the merits of enacting the Tax Cuts and Jobs Act a year ago. But regardless of what one thought of the tax bill as a whole, it is clear that it erred in keeping so many tax giveaways for specific industries and that continuing tax-extenders would double down on that error.
Between the PATH Act of 2015 [a bill that was supposed to put “an end to the repeated tax extender exercise,” according to then-Finance Chairman Sen Orrin Hatch (R-UT) and “break the chain of just extending these tax extenders every 2 years,” according to Sen Sherrod Brown (D-OH)] and the decision to leave most extenders out of the Tax Cuts and Jobs Act, we were optimistic that this practice of temporary tax policy could be put to bed.
When leaders on the Ways and Means Committee began talking about getting rid of the remaining tax-extenders, there was also some reason for optimism.
Rep Vern Buchanan (R-FL), former chairman of the Ways and Means Tax Policy Subcommittee, said last February, "The goal is not to get rid of all of them, but probably a lot of them.”
“All of them” would be a better goal, but “a lot of them” is at least a start. It would be disappointing if Congress couldn’t even do that.
Our organizations arrived at this common ground via slightly different paths. Americans for Prosperity objects to tax-extenders for violating basic tenets of fair-tax policy. The provisions treat individuals and industries inequitably in the tax-code, advancing a culture of government-granted privilege that slows innovation and growth.
The Committee for a Responsible Federal Budget’s concern is driven by needless expansion of already-ballooning deficits and debt. Both groups fundamentally agree that tax-extenders are bad tax, fiscal, and economic policy.
That’s why our organizations partnered with groups from across the political spectrum to oppose reauthorization of extenders in December.
Many extenders harken back a decade. In 2015, some were made permanent. Others were supposed to be put on the road to extinction. It hasn’t worked out that way, largely because every extender has a vocal constituency and willing congressional champions who work in concert to keep the subsidies in place.
That applies to tax-extenders large and small, such as a boatload of renewable-energy tax-credits ($1.9 billion over 10 years), expedited write-offs for race-horses ($2 million) and race-cars ($40 million), and electric-vehicle tax-credits ($5 million).
While the last Congress rightly chose not to renew the extenders or expand the electric-vehicle tax-credit, they could still be revived.
Aside from the needless impact on revenue, there’s the principle. Temporary tax-giveaways are inefficient and unfair, corrupting, and economically distorting. They benefit the well-connected few at the expense of everyone else.
To make matters worse, the extenders would apply retroactively after having expired. The rationalization for extenders is that they will alter economic behavior in a way the government favors.
But even if one deemed it appropriate for government to try and control behavior through tax policy, you simply can’t alter economic behavior that has already happened. It defies logic.
Last year, Rep Lloyd Doggett (D-TX), then-ranking member of the Ways & Means Subcommittee on Tax Policy said: “Certainly there’s little incentive associated with retroactively applying a tax extender.”
It makes little sense to be changing the tax-code for the year that’s already over and even less sense to change the rules after 50 million tax returns have already been filed. Many taxpayers would need to redo their taxes. So much for tax simplicity!
Tax-extenders are a form of corporate welfare. Retroactive tax-extenders are a particularly odious form of that malign practice.
Instead of needlessly complicating an already-contentious spending debate, Congress should take its own advice and eliminate the tax extender merry-go-round, once and for all.
Marc Goldwein is senior vice president of Committee for a Responsible Federal Budget. Russ Latino is vice president, economic freedom portfolio at Americans for Prosperity.
