Political groups and think tanks from across the political spectrum see 2019 as the year that Congress may finally end temporary extensions of tax breaks.
For years, Congress has extended tax incentives for industries on a temporary basis because lawmakers don’t want to balance the long-term cost of the breaks by cutting spending or ending other tax breaks.
But Congress let several of those breaks expire following passage of the 2017 tax law, and more fell by the wayside last year as the government funding showdown dominated the end of 2018. Now, extender opponents see the best opportunity they’ve had in years—if not ever—to end the legislative merry-go-round.
Thanks to the length of time several provisions languished without renewal—nearly two years for some—they could run past the point of retroactive renewal, making them less desirable to the individuals, companies, or industries that take advantage of them.
“Of all the times that we’ve tried to do it, we’ve got a better chance now than many of the others,” said Marc Goldwein, senior policy director for the Committee for a Responsible Federal Budget, a Washington-based group that advocates lowering the national debt and balancing the federal budget. “Part of the reason we think we have the opportunity is that this is the longest time they’ve ever been expired.”
Champions of the expired tax breaks—which cover everything from biodiesel production to economic development in American Samoa—believe an extenders package will need to catch a ride with must-pass legislation, like upcoming government funding bills, in order to stay in effect.
‘Fundamental Fairness Question’
The CRFB helped spearhead an unusually broad alliance of political groups that often stand on opposite sides of tax policy and other political issues—such as Americans for Prosperity, a conservative group with deep pockets and political chapters in most states, and Tax March, a liberal group with the slogan “Tax the Rich” that sought to block the 2017 tax law.
“The way that we think about this, is it’s really just a fundamental fairness question,” said Russ Latino, an AFP vice president focused on economic policy issues. “The notion that well-connected industries can go to Congress and get a carve-out is seen as fundamentally unfair to most people.”
AFP, founded by billionaires Charles and David Koch, launched a direct mail and online advertising campaign in different states and congressional districts to hammer home the anti-extender message.
Constituents of Senate Finance Committee Chairman Chuck Grassley (R-Iowa), a major proponent of the biodiesel tax credit, received an AFP mailer featuring a zombie’s arms reaching up from the ground and a header declaring, “Tax loopholes are like zombies ... They just won’t die,” in dramatic all-caps.
The organization will also spend $250,000 on digital ads targeting people who live in the districts of House Ways and Means and Senate Finance committee members, telling them to oppose tax extenders while coupling the issue with another program AFP wants to end, the Export-Import Bank. The group’s state directors also lobbied members of Congress in early July, asking them not to continue temporary tax break extensions.
“We’ve got a series of events planned across the states to really drive home the message” while Congress is on summer recess, Latino said.
Opponents of tax extenders acknowledge they’re waging an uphill battle—in a February speech on the Senate floor, Grassley warned of potential layoffs in the biodiesel industry if Congress doesn’t extend their benefits, and the Finance Committee may mark up extension legislation in September.
But tax policy experts say there’s less enthusiasm for extenders than in years past.
“There used to be two big engines that drove the tax extenders debate,” said Jon Traub, managing principal of Deloitte Tax LLP’s tax policy group, referring to the R&D tax credit made permanent in 2015 and an individual alternative minimum tax threshold made permanent in the 2017 tax law.
Traub said that fatigue from the near-annual exercise may also be setting in.
“There becomes a sort of resistance to doing this again and again,” he said.
Senators charged with evaluating whether to continue the expired—or expiring—provisions may hope to leave some extenders expired, though some may favor permanence for their own favored breaks.
“The committee should act. Temporary extensions are not helpful,” Finance Committee member Ben Cardin (D-Md.) told Bloomberg Tax on Aug. 1.
Cardin, a member of multiple task forces set up by the committee to examine and make recommendations about the various expiring tax breaks, favors making permanent the expansion of a deduction for energy-efficient buildings that makes it easier for nonprofits to use the break.
The six bipartisan task forces have yet to publish their reports.
But despite the opposition’s greater traction, Goldwein would only allow himself cautious optimism that tax extenders might finally wither away.
“It’s relative optimism,” he said, sounding slightly weary from other fiscal battles fought and lost. “I’ll never discount that Congress will decide to bring back these tax breaks, but I think we have a shot that they won’t.”