Thursday, October 22, 2015

Meet the ‘Tax Extenders’

How an oddball collection of temporary tax breaks became an unkillable $85 billion ritual.

By Brian Faler,

This fall, a strange-looking package of tax breaks is likely to come before Congress. If the past is any indication, it’s going to be pushed through at the very last minute, just as lawmakers are getting ready to leave for their Christmas recess. There’s a break for Puerto Rican rum, one for NASCAR tracks and another that rewards corporate research and development spending. And one of them—this is not a typo—is an exception to an exception to an exception to a tax rule. It benefits multinational banks.

Insiders call them the “tax extenders,” a knot of handouts large and small that moves totally separate from the tax code and has become an illustration of just why the federal budget is so hard to manage—or even to understand.

This year’s batch, which the Senate wants to renew for two years, is projected to cost more than $85 billion. Though tax experts scoff at many of the provisions, they’re rubber-stamped with minimal scrutiny or debate. And though they’re considered temporary, they’re rarely allowed to die.

Over the years, the roster of tax extenders has grown prodigiously. The very first extender bill, the Technical and Miscellaneous Revenue Act of 1988, included eight provisions. By 1992, there were a dozen, and some lawmakers were already bemoaning the practice. “The free ride stops here,” then-House Ways and Means Committee Chairman Dan Rostenkowski (D-Ill.) declared that year. It didn’t. The number of extenders kept growing, and this year Congress is set to extend more than 50 provisions. Some have been renewed more than a dozen times.

The strange status of these tax breaks is a testament to budget gamesmanship. Lawmakers say they want at least some of the provisions to be a permanent part of the code. But Congress’ budgeting rules require lawmakers to consider the 10-year cost of any new provision—and viewed through that lens, these breaks suddenly seem too costly for many lawmakers to pass. So they approve them as one- or two-year “extenders,” slashing the apparent price tag, and they slide right through.

(More here.)


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