Get Rid of Job Killing Tax Extenders; Pay For the Rest
The House Ways and Means Committee plans to mark up six bills tomorrow that would make six temporary tax breaks—part of an annual tax extenders package—permanent. The justification being given for making these provisions permanent is they will “help businesses grow the economy and create jobs.” The resulting permanent increase in budget deficits, however, could eventually reduce economic growth and job growth if the debt-to-GDP ratio becomes large enough.
More importantly, two of the provisions cannot be said to boost even short-term economic growth. The CFC look-though rule (H.R. 4464) and the active financing exception (H.R. 4429) help multinational corporations avoid paying U.S. taxes and create incentives to move jobs and investments overseas. Making these two tax provisions permanent would eliminate jobs and increase budget deficits by $80 billion over the next 10 years.
The six tax provisions that Chairman Camp wants to make permanent are part of a group 50 to 60 temporary tax provisions that are routinely extended for another year or two, and which typically reduce tax revenues by about $100 billion over 10 years. Like other temporary measures, such as extending unemployment insurance for unemployed workers during times of weak labor demand, the budget cost of the tax extenders package is rarely offset. (Mr. Camp notes that paying for the tax extenders package “is not consistent with recent practice by Congress.”) But the House GOP is now demanding that a temporary extension of unemployment insurance (budget cost of about $10 billion) be fully paid for, but not the permanent extension of selected tax extenders (budget cost of $310 billion).
With this markup, committee chairman Dave Camp appears to have morphed from a serious legislator trying to piece together a revenue-neutral reform of our byzantine tax system to a politician who talks out of both sides of his mouth—he supports fiscal responsibility but is proposing to make six temporary business tax breaks permanent and in doing so increase federal deficits by over $300 billion over the next 10 years. If he were truly concerned about long-term fiscal challenges, he would offset these tax breaks by permanently closing other tax loopholes, and he would not be working to make provisions that kill jobs a permanent part of the tax code.