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The Senseless $15 Billion Tax Giveaway Buried In The Budget Deal

By newadmin / Published on Thursday, 08 Feb 2018 22:21 PM / No Comments / 9 views


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Senate Majority Leader Mitch McConnell, right, and Senate Minority Leader Charles Schumer after announcing a budget deal on Wednesday. (Photo By Tom Williams/CQ Roll Call)

There is so much bad policy in the massive two-year budget agreement being debated by Congress that it is hard to know where to begin. But here is a place: Why would lawmakers restore more than 30 special-interest tax subsidies for 2017?

That isn’t a typo. Most of these provisions expired at the end of 2016, and Congress would bring them back, but only for last year. In other words, lawmakers would spend billions of dollars to subsidize activity that already happened.

Think about that for a minute: If the purpose of a tax preference is to encourage businesses or individuals to change behavior, what possible purpose is served by subsidizing activities that have already occurred? By doing so, Congress creates no new economic activity and no new jobs. It is just passing out $15 billion in free money&nbsp;— cash, by the way, that it does not have and must borrow.

Of course, that’s just the cost of a one-year extension. If Congress extends these tax breaks year after year, as it has in the past, the 10-year cost will likely approach $200 billion.

But that’s only part of what’s wrong here. Lawmakers of both parties love nothing more than to rail against “special-interest loopholes.” When they began the exercise that concluded in December as the Tax Cuts and Jobs Act, Congress and President Trump vowed to eliminate nearly all tax deductions, for both individuals and businesses.

Trump’s campaign plans, the House leadership’s “Better Way” June 2016 tax blueprint and even the House-passed version of the TCJA would have made modest dents in tax preferences (although all would have fallen far short of eliminating them).

But the final version of the TCJA failed utterly. It ditched a few preferences — miscellaneous itemized deductions, a tax break for employers of commuters and a special deduction for U.S.-based business production. And it scaled back a few others, most notably the federal itemized deduction for state and local taxes. But for the most part, it preserved nearly all credits, exclusions and deductions.

Now Congress is bringing back more than 30 special-interest loopholes that have been dead for more than a year. While they’re called extenders in Washington shorthand, this language is seriously misleading. Congress is not extending provisions that are in danger of expiring. It is restoring tax breaks that have expired. Some taxpayers may have even filed their returns already, assuming the tax breaks had lapsed permanently.

Finally, there are the merits: Should a nation facing budget deficits that could soon exceed $1 trillion provide more generous deprecation rules for racehorses, NASCAR racetrack owners or movie producers? Will these subsidies Make America Great Again? How about special tax credits for maintaining railroad tracks? (Isn’t that what a railroad is supposed to do anyway?)

Even after all these years, Washington sometimes leaves me speechless. And this is one of those times.

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Senate Majority Leader Mitch McConnell, right, and Senate Minority Leader Charles Schumer after announcing a budget deal on Wednesday. (Photo By Tom Williams/CQ Roll Call)

There is so much bad policy in the massive two-year budget agreement being debated by Congress that it is hard to know where to begin. But here is a place: Why would lawmakers restore more than 30 special-interest tax subsidies for 2017?

That isn’t a typo. Most of these provisions expired at the end of 2016, and Congress would bring them back, but only for last year. In other words, lawmakers would spend billions of dollars to subsidize activity that already happened.

Think about that for a minute: If the purpose of a tax preference is to encourage businesses or individuals to change behavior, what possible purpose is served by subsidizing activities that have already occurred? By doing so, Congress creates no new economic activity and no new jobs. It is just passing out $15 billion in free money — cash, by the way, that it does not have and must borrow.

Of course, that’s just the cost of a one-year extension. If Congress extends these tax breaks year after year, as it has in the past, the 10-year cost will likely approach $200 billion.

But that’s only part of what’s wrong here. Lawmakers of both parties love nothing more than to rail against “special-interest loopholes.” When they began the exercise that concluded in December as the Tax Cuts and Jobs Act, Congress and President Trump vowed to eliminate nearly all tax deductions, for both individuals and businesses.

Trump’s campaign plans, the House leadership’s “Better Way” June 2016 tax blueprint and even the House-passed version of the TCJA would have made modest dents in tax preferences (although all would have fallen far short of eliminating them).

But the final version of the TCJA failed utterly. It ditched a few preferences — miscellaneous itemized deductions, a tax break for employers of commuters and a special deduction for U.S.-based business production. And it scaled back a few others, most notably the federal itemized deduction for state and local taxes. But for the most part, it preserved nearly all credits, exclusions and deductions.

Now Congress is bringing back more than 30 special-interest loopholes that have been dead for more than a year. While they’re called extenders in Washington shorthand, this language is seriously misleading. Congress is not extending provisions that are in danger of expiring. It is restoring tax breaks that have expired. Some taxpayers may have even filed their returns already, assuming the tax breaks had lapsed permanently.

Finally, there are the merits: Should a nation facing budget deficits that could soon exceed $1 trillion provide more generous deprecation rules for racehorses, NASCAR racetrack owners or movie producers? Will these subsidies Make America Great Again? How about special tax credits for maintaining railroad tracks? (Isn’t that what a railroad is supposed to do anyway?)

Even after all these years, Washington sometimes leaves me speechless. And this is one of those times.

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