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Extenders Are Part of the Long Game in Tax Overhaul

As the debate over renewing dozens of expiring tax breaks unfolds this year, House Republicans are making an unusual sales pitch: Congress needs to cope with the fact that the grab bag of reductions is much more costly than lawmakers like to admit.

Led by Ways and Means Chairman Dave Camp, GOP lawmakers want to make some of the more than 50 expired tax breaks permanent rather than just extend them for two years, as the Senate would prefer. Such a move would, of course, make the measures counted together significantly more expensive — and emphasizing the costs of tax breaks isn’t a typical GOP tactic. But Republicans have their sights set on a bigger prize, and Camp is playing a longer game in the debate over the so-called extenders. 

By extending all of the cuts permanently, lawmakers and the Congressional Budget Office would have nearly $1 trillion less in future revenue to work with over the next 10 years. Lowering those revenue expectations, or baselines, would increase deficit projections, because the CBO would be counting less tax money to pay for programs. That would leave Congress with a choice of cutting spending or raising taxes to match the projected shortfalls.  

“You constantly see these battles over what’s in the baseline because of the reality that the baseline exerts influence over what the budget debates look like,” said Donald Marron, the former director of the Tax Policy Center.

Camp and his allies argue the breaks have become permanent by default. The Michigan Republican often notes many of the breaks have been extended enough times to meet the 10-year window used when scoring something as “permanent” under congressional budgeting rules.

Getting Senate Democrats to go along will be a tough sell, and many believe Congress will simply extend the extenders yet again in a lame-duck session. In the meantime, the House effort offers Republicans a chance to score some points with the business community ahead of the midterm elections. 

More than 50 so-called extenders expired on Dec. 31. A Senate package that would renew nearly all of the breaks for two years remains stalled. The Senate bill would cost $84.1 billion over 10 years; making all of those breaks permanent would cost more than $930 billion, according to the CBO. 

A permanent extension is a non-starter for most Democrats, even those who support the individual breaks. “It’s one thing to not pay for [it] and do it for a year or two, and it’s another thing to make it permanent and not pay for it,” House Ways and Means ranking Democrat Sander M. Levin of Michigan said last month. 

Democrats on the panel — and the White House, in its veto threats — cited the absence of offsets as a reason for their opposition. Yet they don’t have particular offsets in mind; the Senate plan, with its two-year horizon, also is not paid for. They’re worried that budgeting for permanent tax breaks would be a -multibillion-dollar Trojan horse that could ultimately impose a lower ceiling on spending in future deficit debates and bring down revenue goals for any future tax overhaul.

“The result is less revenue,” said Chuck Marr, director of tax policy at the left-leaning Center on Budget and Policy Priorities. Less revenue, he said, would effectively produce a smaller government.

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