Congress is threatening to upend a Washington tradition of last-minute legislating and lobbying over temporary tax breaks.
As lawmakers wrestle over reauthorizing a package of more than 50 miscellaneous tax provisions that expired at the beginning of the year, known as tax extenders, House Republicans and some in the Senate are considering making some of the biggest breaks permanent.
That would alter the cycle of legislative maneuvering and lobbying that usually accompanies the reauthorization of extenders, a process that has become a Washington ritual.
Curtis Dubay, a tax researcher at the conservative Heritage Foundation, said the dynamic has changed “a little bit because now the Democrats have an incentive to come to the table and give a little” on the tax extenders.
In April, the Democratic-led Senate Finance Committee passed a bill that would have re-upped 55 expiring tax breaks for two years, at a cost of $85 billion over 10 years to the Treasury.
That package included business tax breaks as far-flung and specific as allowing NASCAR to write off investments in race tracks, to faster and bigger deductions for expenses for producing movies.
Many of the provisions have been extended so many times, they are effectively permanent. 39 of the provisions currently under consideration have been extended at least three times, a Tax Analysts analysis found.
One of the biggest tax provisions, a tax credit for companies that perform research and experimentation worth $80 billion over 10 years, has been re-upped 15 times since it was enacted in 1981.
Each time, it’s been an occasion for legislative horse-trading and heavy lobbying.
In the 2012 election cycle, according to a November analysis from Bloomberg BNA, 171 lobbyists working on extenders-related issues gave $781,417 to lawmakers on the committees responsible for tax legislation. The lobbyists also benefited as companies sought to protect narrow tax provisions that affected their business.
Outgoing House Ways and Means Committee Chairman Dave Camp, however, has prioritized making key provisions permanent, passing a series of bills over the summer to permanently implement several measures, such as the R&E credit.
One possible outcome of negotiations between the House and Senate in the lame-duck session could be that Democrats ask for provisions they favor to be made permanent with the Republicans’ priorities.
Frank Clemente, executive director of the liberal group Americans for Tax Fairness, has been pushing for lawmakers to ask for expansions of low-income and child tax credits set to expire in 2017 to be made permanent in exchange for making the research and experimentation permanent.
“There would be a big public outcry” if Congress made the business provisions permanent without also helping families, Clemente said. “This election was not a mandate to give corporations tax breaks.”
“This is a major battle going on behind the scenes right now,” Clemente added.
For their part, representatives of a range of industries told reporters on a conference call this week that the priority is extending the provisions, whether permanently or temporarily, before the year ends. Lawmakers are trying to vote before they are scheduled to head out of town Dec. 11, and the IRS has asked them to act by the end of November.
“This is not a theoretical topic, this has to be done immediately,” said Drew Greenblatt, the owner of Marlin Steel Wire Products in Baltimore. Greenblatt said a provision allowing companies to write off a larger amount of investments immediately affected his hiring plans.
For the incoming Republican majorities, however, the priorities include setting the stage for the next Congress. Mitch McConnell, the Kentucky senator set to become majority leader, has said he hopes to “clear the decks” of extenders to allow Republicans to focus on their own agenda.
And Camp hopes to make a number of extenders permanent to lower the baseline amount of tax revenue collected by the government. That would aid his successor, Rep. Paul Ryan of Wisconsin, in pursuing revenue-neutral tax reform that would cut tax rates and broaden the tax base by eliminating credits, deductions and loopholes — a goal that eluded Camp during his tenure.
But legislators are also just sick of the recurring issue.
“It’s time to put an end to the annual kabuki dance that is tax extenders,” Sen. Chuck Grassley, R-Iowa, said on the Senate floor Thursday.
