Tax Extenders Study Would Signal Commitment to Both Tax Reform and Deficit Reduction


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The Senate “compromise” tax bill unveiled last night has dropped an important provision that would have required the JCT and GAO to evaluate whether the so-called “tax extenders” are fulfilling their intended purposes.  This provision was included in both the House-passed version of the extenders, and in the Senate version that Finance Committee Chair Max Baucus introduced just one week ago.  Adding this study back into the bill would be a small but meaningful step that would signal Congress’ interest in tax reform, deficit reduction, and general government efficiency.

The “tax extenders” package consists of about 50 expiring tax provisions – costing nearly $30 billion each year – that Congress has repeatedly extended on a temporary basis.  These tax breaks, or “tax expenditures,” are designed to encourage everything from railroad track maintenance to coal mine safety, but Congress has no idea whether they’re actually accomplishing these things at a reasonable cost.  Rather than using the extenders repeated expiration as a chance to review their effectiveness, Congress routinely extends them at the last minute without any serious analysis (just as it seeks to do this year as part of a larger bill seeking to extend all of the Bush tax cuts).  The JCT/GAO study, which until last night appeared to be closely wedded to the tax extenders package, would have filled this analytical void by examining each tax extender using ten different criteria designed to reveal whether they are effective in achieving their intended purposes.

While the White House continues to express concern that major changes to the compromise tax bill could unravel any bipartisan agreement, the addition of the tax extenders study is a modest, commonsense change that should not divide lawmakers along party lines.  Indeed, the extenders study could actually broaden the base of support for the Senate compromise bill.  In explaining the importance of the study, both the House-passed bill and the bill introduced by Senator Baucus last week cite the effect these provisions have on the “escalating public debt,” and the way in which these tax breaks complicate the tax code for individuals and the IRS.  Adding this study back into the bill could signal to both deficit hawks and tax reform advocates that these tax provisions will not be allowed to continue unless very good reasons can be found to justify their existence.

In addition to widespread support for the study in the House, and apparently within the Senate Finance Committee, the sentiment behind the JCT/GAO study has also picked up significant support among outside groups.  Eric Toder of the Tax Policy Center, the Center for American Progress, and a dozen other national groups have said that the study would be very useful in informing future debates over extending these provisions.

While not mentioning the tax extenders study specifically, President Obama’s Chief Performance Officer, the GAO, the Pew-Peterson Commission on Budget Reform, the OECD, and numerous, other, groups, have also cited the need for additional evaluation of tax breaks.  The tax extenders study would be an important step forward in conducting these evaluations.

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