Congress Contemplating Massive Deficit-Finance | Washington Examiner
Congressional negotiators are working on a deal to pass tax breaks that could end up being the biggest legislative addition to the deficit since President Obama's 2009 stimulus.
The negotiations concern a package of potentially dozens of tax breaks for corporations and families. The final mix of tax breaks will be determined by bargaining between congressional Democrats and Republicans and the White House.
Some of the key players, however, have been suggesting that they're working toward a larger bill. "There is a growing appetite to find a substantial and balanced deal," Oregon's Ron Wyden, the ranking Democrat on the Senate Finance Committee, said Thursday.
The package is a grab bag of temporary tax provisions that have expired and that, for the most part, are regularly re-upped each time they expire. For that reason, they're known as "extenders." Most of them ran out at the beginning of this year and won't be available for taxpayers unless they are reinstituted before the year ends.
The bargain could make certain provisions permanent, rather than temporary, which lawmakers have long sought to do with the biggest and most familiar breaks to provide certainty.
But, on paper, the cost would be high. The Committee for a Responsible Federal Budget, a nonprofit group that advocates lowering the federal debt, estimated this week that one possible version of the permanent tax breaks package would cost the Treasury up to $840 billion over 10 years, when interest on the associated debt is taken into account.
That's only on paper, however. Many lawmakers in both parties have chosen to ignore the stated budgetary costs of extending the breaks. The logic for that is they are reinstated every year, so they should be considered the same as permanent tax breaks in the tax code, such as the mortgage interest deduction. That popular tax break loses money for the government every year, but Congress doesn't cut spending or raise taxes to make up the difference.
Rep. Paul Ryan laid out that argument on the House floor in February, back when, as chairman of the House Ways and Means Committee, he was shepherding a permanent extension of charitable tax credit extenders.
"This isn't costing anything, in that we are not lowering someone's taxes. We are just keeping their taxes where they are, and we are preventing them from going up," the Wisconsin Republican said when Democrats criticized GOP lawmakers for adding to the deficit.
"We don't hear all these hues and cries about the deficits when we extend these tax provisions for two years. We don't hear these concerns when we extend current law tax provisions for one year. And we don't hear these concerns about deficits when we retroactively extend it from last year, going forward," Ryan also said. "We only hear these concerns when we are giving people the certainty."
Congress did pass a one-year re-extension of a broad package of extenders late last year, just before the deadline for companies and individuals to claim them on their tax returns.
Marc Goldwein, a senior vice president at the Committee for a Responsible Federal Budget, disagrees with Ryan's logic and believes that the extenders should be offset, he told the Washington Examiner.
But granting that some extenders, such as the research tax break for businesses that has been extended 16 times since 1981, really should be considered part of the baseline, much of what's in consideration should not be.
In Goldwein's estimation, lawmakers are discussing as much as $200 billion in tax breaks that have not been part of current policy until now. That would be enough, Goldwein noted, to provide relief from the sequestration automatic spending cuts for two years, or to cut the corporate tax rate from its current 35 percent to under 30 percent.
One example is a version of the research tax credit that the House passed earlier this year, which included an expansion of the tax credit that doesn't exist currently and would cost an additional $73 billion over 10 years.
Another is one of Democrats' top asks, namely that the Child Tax Credit, which provides $1,000 for child, be indexed for inflation. Currently, rising prices eat into the real value of the credit each year.
Including that measure would add another $73 billion to deficits, according to the Committee for a Responsible Federal Budget.
One example is a version of the research tax credit that the House passed earlier this year, which included an expansion of the tax credit that doesn't exist currently and would cost an additional $73 billion over 10 years.
Another is one of Democrats' top asks, namely that the Child Tax Credit, which provides $1,000 for child, be indexed for inflation. Currently, rising prices eat into the real value of the credit each year.
Including that measure would add another $73 billion to deficits, according to the Committee for a Responsible Federal Budget.
The Child Tax Credit provision is one that could generate added pushback from conservatives.
Part of the Child Tax Credit is refundable, meaning that if the credit exceeds a filer's tax liability, the government will write them a check. Dan Holler, a representative for the conservative group Heritage Action, said "the concerns that we have are when you start talking about the refundable tax credits in there, because that's essentially spending."
His group, he said, is not concerned about revenue lost from cutting taxes on businesses or individuals. "If it's an actual tax cut, then that's good," he said.