Senate tax writers cleared a hodgepodge of expired tax breaks on Tuesday, as lawmakers insisted they don’t want to wait until year’s end to restore a group of incentives that historically has had bipartisan support.
The Finance Committee voted to extend the roughly $95 billion collection of tax breaks, known as “extenders” in Washington-speak, through 2016 by a 23-3 vote, in the latest example of Congress’s stop-and-start approach to the preferences. Sens. Dan Coats (R-Ind.), Mike Enzi (R-Wyo.) and Pat Toomey (R-Pa.) were the no votes.
Congress last enacted the group of preferences, which includes the popular credit for business research and a more controversial incentive for wind energy, at the end of 2014 – only to watch the tax breaks expire less than two weeks later.
“All of these tax provisions are meant to be incentives – they are meant to encourage and promote certain activities,” Finance Chairman Orrin Hatch (R-Utah) said at the committee meeting. “If they are expired, they aren’t doing much good. That being the case, we need to move this package forward as soon as possible.”
Hatch isn’t alone in wanting to deal with extenders quickly. House Ways and Means Committee Chairman Paul Ryan (R-Wis.) has also maintained that he wants to avoid what he called “another Dec. 11 experience.” (The Senate actually didn’t pass the one-year tax extender deal until Dec. 16, 2014.)
But there are serious questions about how quickly Congress can send President Obama a measure reviving the tax breaks. Ryan and the House have taken a different approach this year, passing permanent extensions of the research credit, an incentive to allow small businesses to more quickly write off purchases, a string of preferences to encourage charitable giving and others.
Congress will also have to deal with a number of big-ticket items when lawmakers return from their August recess, including a Sept. 30 deadline for government funding and the recent agreement the Obama administration struck with Iran. Hatch sounded skeptical after the markup that the package of tax breaks could be added to the Senate’s highway bill, which was released Tuesday.
Business groups have been pressing Congress to act quickly, saying swift action would give companies a better chance to plan long-term. The National Association of Manufacturers noted Tuesday that it had “urged Congress to act as soon as possible to extend these provisions for as long as possible, to provide manufacturers with a bridge of certainty to help with business planning decisions until comprehensive tax reform is enacted into law.”
Tax writers often complain that there’s plenty of bad provisions among the more than 50 preferences that Congress often approves with little more than a date change. For instance, various lawmakers and outside groups have criticized incentives for racetrack and racehorse owners and the Puerto Rican rum industry.
But part of the reason the expired tax breaks routinely get restored is that they’re packaged together, because each lawmaker generally has at least some pet projects or favored incentives in the deal.
“These temporary tax provisions are nobody’s idea of perfect economic policy,” said Sen. Ron Wyden (Ore.), the committee’s top Democrat. “If each member of this committee was made king or queen for a day and wrote their own bills, you’d likely wind up with 26 different products.”
But the Finance Committee didn’t remove any of the expired provisions from its package – and even added one back, an incentive for electric motorcycles championed by Wyden that was left out of the 2014 extenders package.
Toomey and Coats called for stripping or phasing out the production tax credit for alternative energy, with Toomey insisting “we’ve been hearing for nearly 20 years now how very close this industry is to being competitive.”
But they withdrew their amendments, acknowledging that the wind incentive has broad support from Democrats and top Republicans such as Sens. Chuck Grassley (Iowa) and John Thune (S.D.).
The committee expanded other provisions, adding bicycle-sharing programs to an incentive for workers that use mass transit and adding Broadway shows to a preferance for television and film productions. Sen. Charles Schumer (N.Y.), the Senate Democrats’ leader-in-waiting, worked to expand both those provisions.
For businesses, Senate tax writers also approved incentives for companies that invest in poor areas and hire veterans and a pair of provisions that allow multinational companies to defer paying taxes on offshore income.
Tax breaks for families facing college expenses and teachers using their own money to buy school supplies also got restored, while the committee added in a provision helping homeowners who rework their mortgage.
But even with Tuesday’s bipartisan vote, Finance members from both sides of the aisle said they were tired of not finding a more permanent solution for the tax breaks.
Hatch, for instance, said that he believed some of the expired incentives should be made permanent but “agreed to defer litigating the issue of permanence until a later time” so that the Senate could move more quickly.
The debate over extenders also showed how difficult it would be to craft a tax reform deal, something Congress has already struggled with for years.
Tax writers quarreled Tuesday over whether to end some incentives, like one of the preferences that allows businesses to quickly write off expenses, or to make them permanent.
“We should acknowledge that many of the temporary provisions that we’re extending today have been around for a decade or more, and are in fact temporary in name only,” said Thune.
— This story was updated at 7:08 p.m.
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