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News from EPI Take Tax Policy Off Autopilot: Tax Extenders Are Bad Public Policy Implemented Poorly

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Tax extenders—more than 50 separate tax provisions, which were originally designed to be in effect temporarily but are instead routinely extended every time they expire—are both poorly designed and poorly implemented public policy. In a new Economic Policy Institute issue brief, Time to Take Tax Policy Off of Autopilot, economic analyst Joshua Smith writes that while some of these provisions have laudable goals, there are better ways to enact policy than by summarily extending temporary tax incentives. Many of the extenders are simply giveaways to select corporations and individuals that would not be approved were they to be considered one-by-one. Between now and 2024, the annual cost of extending the 55 provisions that expired this January 1 is an astounding $46.6 billion, but tax extender packages will only continue to grow more costly as further provisions lapse, writes Smith.

“The tax extenders are the worst of both worlds—bad public policy, implemented poorly. Even if there are some worthwhile provisions, they should not be blindly extended every two years alongside those that are completely unnecessary, or are inefficient or ineffective,” said Smith.

In addition, Smith writes that the temporary nature of these provisions diminishes their behavioral incentives, since potential recipients can never be entirely sure the provision will last.

“Unfortunately, the chair of the Senate Finance Committee, Senator Ron Wyden, has said he hopes that Congress will pass the tax extenders promptly, in spite of the fact that this package includes regressive giveaways to corporations at the expense of taxpayers,” said Smith. “Instead, Congress should take a good look at each tax extender and see if it efficiently targets useful policy goals. They should improve and make permanent those that pass muster, and shelve those that do not.”

With House Ways and Means Committee Chairman Dave Camp set to release a draft comprehensive tax reform proposal later this week, the fact that Congress routinely lumps corporate tax giveaways together to hide them from the American people should make taxpayers skeptical that they their elected representatives will put the needs of the American people before the needs of corporate lobbyists when they consider tax reform.