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Tax Extenders in a Post Tax Reform World

March 16, 2018

Yesterday, the Tax Policy Subcommittee, chaired by Rep. Vern Buchanan (R-FL) held a hearing on “Post Tax Reform Evaluation of Recently Expired Tax Provisions.”  This hearing was a chance for lawmakers, stakeholders, and advocates to examine temporary tax provisions – often referred to as “tax extenders” – in the tax code following the implementation of the Tax Cuts and Jobs Act.

At the start of the hearing, Chairman Buchanan said:

“Following our historic tax reform, it should not be business as usual with respect to the tax extenders.  Now is the time to examine each of these provisions one-by-one to determine whether and how they fit into the new tax code.”

He added that this means taking a hard look at which provisions provide value to Americans:

“For each provision, we will ask: what role does this provision play in the new tax code? If it is no longer needed because of the reforms that have been enacted, the provision should be eliminated. If the provision continues to play an important role and enhances the new pro-growth tax reform, we should consider making it permanent. And in that case, we will ask those who benefit from the provision to consider what other tax benefits they would forego in favor of having this provision made a permanent part of the tax code.”

House Ways and Means Chairman Kevin Brady (R-TX) agreed with that sentiment, saying:

“We built a new tax code for the long term. Temporary measures are rarely good tax policy. Those that don’t pass these tests should be eliminated so that we can continue our ongoing work to improve America’s tax code – making it even more pro-growth and simpler.”

Throughout the course of the nearly four-hour hearing, the Subcommittee heard testimony from over 20 witnesses. Some stakeholders expressed why they believed certain tax extenders are beneficial, while others made the case for why the use of temporary provisions should no longer be part of the status quo.

Ryan Alexander, President of Taxpayers for Common Sense, highlighted the significance of this hearing:

“The practice of tax extenders undercuts the most broadly agreed upon goals of tax policy: to provide certainty to individuals and businesses; to provide a predictable flow of revenue to the government; and to encourage future behavior. … We welcome this hearing as one of the first instances of oversight on extenders and expiring provisions in the tax code.”

Executives from industries ranging from agriculture to energy to real estate engaged in an open dialogue with the Subcommittee on why they believe certain extenders should either be extended or made permanent, but many of the fiscal policy advocates agreed with Ms. Alexander, expressing their belief that tax extenders should no longer be part of the tax code.

Maya McGuineas, President of the Committee for a Responsible Federal Budget, emphasized to the Subcommittee that extenders are expensive, unsound fiscal policy:

“Most importantly from a fiscal perspective, extenders are costly. Congress almost always extends these tax breaks without offsets. Since 2012, Congress has passed four extenders laws that added more than $1 trillion to deficits over their respective ten-year windows including interest. We simply can’t afford these tax cuts that have routinely made a poor fiscal situation even worse.”

David Burton, Senior Fellow in Economic Policy at The Heritage Foundation, made the case that tax extenders are a distortion in the economy, leaving many hardworking families behind:

Tax preferences distort the economy by picking winners and losers. … In economics terminology, tax preferences reduce the production possibility frontier. In plain terms, they reduce the incomes of the American people.”

Rep. Jim Renacci (R-OH) asked witnesses for their perspectives on why now is the right time to focus on phasing out many of these extenders and how that can be done without disrupting individuals and businesses that have benefited from them. Ms. Alexander responded:

“Because the corporate rate was reduced so significantly, because of the depreciation and expensing and pass-through rules … This is a good time to start landing the plane slowly. If you wait five years, you’ll have to start landing a lot more slowly than if you did it now.”

Richard Phillips, Senior Policy Analyst at the Institute on Taxation and Economic Policy, echoed the need to address tax extenders now, stating:

“We need to remove the special interests from the tax policy making process, and one of the most important first steps to accomplish this would be to end the tax extenders tradition once and for all.”

Chairman Buchanan closed the hearing by stating that in order to achieve the long-term growth that a new tax code will usher in, we need to seriously consider the purpose of tax extenders:

“What we’ve tried to do…in tax reform is grow this economy. … Our goal is to try and grow our communities and make America the best place in the world to do business.”

CLICK HERE to learn more about today’s hearing.