Lawmakers question the wisdom of $16 billion in ‘tax extenders’ for special interests

Introduction

Congressional Republicans and Democrats agree on this much: giving narrow special interests temporary — and often retroactive — tax breaks is an awful way to conduct government business.

“Temporary measures are rarely good tax policy,” House Ways and Means Committee Chairman Kevin Brady, R-Texas, said Wednesday during a daylong hearing on such provisions.

“We either include tax provisions in the permanent law, or we eliminate them,” said Rep. Lloyd Doggett, D-Texas.

Wednesday’s hearing of the Ways and Means Tax Policy Subcommittee came a day after a Center for Public Integrity investigation revealed how Congress filled February’s Bipartisan Budget Act of 2018 with numerous temporary tax provisions that benefited special interests — sometimes, extremely narrow ones, such as race horse owners and tuna canners.

These interests often sought such favors on Capitol Hill armed with lobbying might and campaign cash. And the tax provisions they’ve won aren’t cheap: the latest round included in the February budget bill will cost the U.S. Treasury about $16 billion over the next decade.

But while the bipartisan buy-in heartened some reform advocates testifying before the subcommittee, that’s no guarantee that lawmakers, who often struggle to compromise on even noncontroversial matters, have the backbone to reduce or eliminate so-called “tax extenders” and related provisions.

Several of the 21 witnesses who testified argued that axing temporary tax provisions would result in a host of unintended consequences, from economic hardships to health concerns.

An existing tax provision affecting construction of commercial and government buildings will continue to “improve the efficiency of these buildings, lower the cost,” testified former Rep. Rick Lazio, R-N.Y., who’s now senior vice president at Alliantgroup, a firm specializing in obtaining tax incentives for clients.

Ethanol companies aren’t opposed to the retroactive tax extender they recently received but need “an incentive that looks into the future,” said Ed Hubbard, general counsel for the Renewable Fuels Association.

And Rep. Tom Reed, R-N.Y., dropped by the hearing to plug the recent budget bill’s tax break for auto race tracks. He cited the Watkins Glen International facility in his Upstate New York district as an economic engine and job creator.

But several government reform advocates who testified were hardly convinced. The current tax breaks are a “hodge-podge package of unrelated provisions” with “no rational basis as a whole” and are “passed without debate on any of the individual provisions,” said Ryan Alexander, president of the nonpartisan Taxpayers for Common Sense.

Making tax extenders retroactive, as Congress often does, is a particularly pernicious practice since it’s effectively “paying people to do what they have already done,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget.

Some Republicans seemed less inclined to do away with some temporary tax breaks and more inclined to make them permanent features of federal tax policy. And for those tax provisions Congress decides to dispatch, timing is key, they said.

“If you end them today, you are picking winners and losers,” argued Rep. Jim Renacci, R-Ohio. The challenge for lawmakers is how “bring this plane down slowly.”

A couple of Democrats used the hearing as a platform to chide their Republican colleagues.

Rep. Suzan DelBene, D-Wash., noted that the tax reform bill President Donald Trump signed into law in December contains numerous temporary tax provisions that Congress must, in the near future, address — and few Republicans seemed to be concerned at the time.

Doggett accused some Republicans of “rank hypocrisy” for supporting the tax bill and subsequent budget bill — both contained temporary tax provisions — only to criticize temporary tax provisions now.

Rep. Vern Buchanan, R-Fla., chairman of the tax policy subcommittee, noted that the Trump tax reform bill significantly reduced corporate tax burdens.

With the tax bill settled law, now is the time for Congress to rethink whether to offer any new tax provisions at all, he said.

“The question now is: Why do you need more tax incentives?” Buchanan asked his colleagues. “A lot of these things, we’ve got to take a hard look at.”

READ THE STORY:

Congress snuck dozens of tax breaks into the budget deal. Here’s where they went.