Tax­pay­ers lose slew of breaks with end of 2013 Retroac­tive ex­ten­sion bill likely to pass

The Washington Times Weekly - - Politics - BY STEPHEN DINAN

A fi­nal con­gres­sional stale­mate in late De­cem­ber means the New Year’s ex­pi­ra­tion of a host of tax breaks, amount­ing to a $54.2 bil­lion in­crease for green-en­ergy busi­nesses, teach­ers, home­own­ers, col­lege stu­dents and oth­ers.

Busi­nesses will take the big­gest hit, with the dis­ap­pear­ance Wed­nes­day of a valu­able re­search tax credit, sub­si­dies for build­ing wind tur­bines and in­cen­tives to make en­ergy ef­fi­ciency im­prove­ments to build­ings.

In­di­vid­u­als will take hits, too. Those who pay col­lege tu­ition will lose a tax credit, as will tax­pay­ers who deduct state and lo­cal sales tax pay­ments or who pay mort­gage insurance. Teach­ers will lose a tax credit for buy­ing class­room sup­plies. Some com­muters no longer will get fed­eral tax help for tak­ing pub­lic tran­sit to work.

That’s not to say the breaks are gone for good.

An­a­lysts on all sides ex­pect Congress to try to pass a bill ex­tend­ing some or all of the cred­its, and those de­ci­sions are likely to be retroac­tive to the first of the year.

Also ex­pir­ing are some of the ben­e­fits avail­able to those who have lost jobs be­cause of an ev­er­more global free trade regime. The Trade Ad­just­ment As­sis­tance pro­gram is a par­tic­u­lar pri­or­ity for Democrats, who say that while ba­sic ben­e­fits re­main, add-ons such as help for older work­ers ex­pire.

“TAA is our com­mit­ment to work­ers com­pet­ing in a glob­al­ized econ­omy, and we must im­me­di­ately ex­tend the im­prove­ments that we made in 2009 when Congress re­turns,” Rep. Sander M. Levin, the rank­ing Demo­crat on the House’s tax-writ­ing com­mit­tee, said Tues­day.

But the tax cred­its and the trade ben­e­fits could be­come en­snared in a larger de­bate about over­haul­ing the broad tax code, in which thou­sands of spe­cial breaks could come un­der scru­tiny.

A few de­vel­op­ments late in 2013 sug­gest things could be messy.

Pres­i­dent Obama may have de­railed ef­forts when he said he would nom­i­nate Sen. Max Bau­cus, Mon­tana Demo­crat and chair­man of the Fi­nance Com­mit­tee, to be am­bas­sador to China.

Mr. Bau­cus was work­ing with his House coun­ter­part, Rep. Dave Camp, Michi­gan Repub­li­can, to set the stage for some tax re­form.

If he is con­firmed to the am­bas­sador­ship and de­parts, the Se­nate will have to restart the process.

Sen. Ron Wy­den, the Oregon Demo­crat most likely to suc­ceed Mr. Bau­cus as chair­man of the Fi­nance Com­mit­tee, said in De­cem­ber he be­lieves House Repub­li­cans are mov­ing away from a broad over­haul.

“It looks more and more like the other body has in ef­fect de­cided to, if not slowwalk tax re­form, cer­tainly take its time,” Mr. Wy­den said.

He took that as a sig­nal that Congress should pro­ceed with ex­tend­ing the ex­pir­ing tax cuts as a stand-alone bill and deal with the mas­sive tax code over­haul later.

The Con­gres­sional Re­search Ser­vice iden­ti­fied seven tax cred­its for in­di­vid­u­als that ex­pired at the end of 2013, and another 49 aimed at busi­nesses and in­vestors.

Most of them had been set to ex­pire ear­lier but were ex­tended in last-minute deals.

Tax pro­fes­sion­als say the year-to-year ex­ten­sions are no way to pro­vide cer­tainty for tax­pay­ers, but the Con­gres­sional Re­search Ser­vice said short-term ex­ten­sions force pol­i­cy­mak­ers to re­view tax cred­its reg­u­larly to make sure they are shap­ing be­hav­ior in eco­nom­i­cally ben­e­fi­cial ways.

Then there are con­cerns about another $50 bil­lion in tax cuts, which will only deepen pro­jected deficits.

The Center on Bud­get and Pol­icy Pri­or­i­ties, a left-lean­ing fis­cal think tank, said that if Congress wants to ex­tend the ex­pir­ing tax breaks, it should find tax in­creases or other spend­ing cuts to cover the hit to the bud­get.

Chuck Marr, the center’s di­rec­tor of fed­eral tax pol­icy, said that pay­ing for the breaks would mean a sig­nif­i­cantly lower debt bur­den in the next 25 years.

“We’d still need to do more to ad­dress long-term deficits and mod­er­ate the debt ra­tio, but pay­ing for the ex­ten­ders would rep­re­sent im­por­tant progress,” Mr. Marr ar­gued in a blog post­ing.

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