House GOP advances $310B tax breaks bill

House Republican tax writers cleared long-term extensions of six tax breaks on Tuesday, over the objections of Democrats who accused Republicans of fiscal irresponsibility.

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Ways and Means Committee Chairman Dave Camp (R-Mich.) said the measures were needed to end a start-and-stop cycle that has seen the tax breaks continually extended on a short-term basis, at times for decades.
 
Several of the six tax breaks considered by the House Ways and Means Committee, including the research and development credit prized by the business community, have historically had broad bipartisan support. Each of the incentives was among the more than 50 preferences commonly known as tax extenders that expired at the end of 2013.

“If we extend policy for 30 years, we ought to make it permanent,” Camp told reporters after the hearing. “One of the problems facing a lot of job creators is the uncertainty of our tax laws.”

Democrats said the $310 billion price tag that comes with the permanent extension of the tax breaks was far too high, especially because the GOP has refused to extend long-term unemployment insurance without offsets.

Democrats have fought for months to extend those benefits, as part of their broader election-year messaging on fighting income inequality.

Rep. Sandy Levin (Mich.), the panel’s top Democrat, said Republicans were being hypocritical, given their longstanding rhetoric on the need for fiscally sound policies.

“It flies smack in the face of what the chairman and others have said was the key to the future, and that was fiscal responsibility,” Levin said. “This is fiscal irresponsibility.”

Rep. Lloyd Doggett (D-Texas) also noted that Ways and Means, in another bill considered at Tuesday’s markup, stripped out a $1 million a year provision to help foster youth that was part of a broader sex trafficking bill.

Still, the Democrats’ stance also forced them to vote against policies they’ve long supported, with some even voting against legislation they just recently co-sponsored.

Rep. Earl Blumenauer (D-Ore.), who backed the extension of the research credit, was the only Democrat to support any of the six tax breaks.

That extension would also expand the research credit, raising its cost to roughly $155 billion over a decade — or about the same cost as the other five tax breaks combined.

Two Democrats who co-sponsored the extension of the research credit, Reps. John Larson (Conn.) and Linda Sanchez (Calif.), both voted against the measure. Levin is a long-time supporter of the credit as well.

Ways and Means also cleared measures to extend a deduction for small-business expenses known as Section 179, two tax breaks that help multinational corporations with offshore income and two incentives for S corporations, a type of business where owners pay taxes as individuals.

Camp brushed aside the Democratic criticisms, noting that the Senate Finance Committee had recently passed a bipartisan extenders package that wasn’t paid for and that Democrats had backed short-term extensions without offsets in the past.

He also pointed out that Democrats hadn’t offered any offsets of their own at Tuesday’s markup, and suggested that extending the research credit would have more positive effects on the economy than an extension of jobless benefits.

"We need to get out of this trap of temporarily extending policy and letting it expire," Camp said. "That is the worst of all worlds, and I'm going to do everything I can to try to move this issue forward."

The Senate Finance extenders package would extend the six provisions Ways and Means considered Tuesday and dozens of others for two years, at a cost of roughly $85 billion.

Camp said that more permanent extensions of the tax breaks would catch the U.S. up with global competitors that don’t allow incentives for research and other key tax breaks to expire.

The Ways and Means chairman, who has announced he won’t seek reelection this year, said he expected the committee to mark up more permanent extensions of tax incentives in the coming months.

House Majority Leader Eric Cantor (R-Va.) has already said that the extension of the research credit is likely to get a floor vote in May, while the Senate is expected to vote on the broader extenders package in the coming weeks.

Tax writers have said they don’t expect a final extenders deal to pass until after November’s midterm elections.

Camp has cast his work on the tax extenders as a way to spur momentum on tax reform, the overriding goal of his three-plus years as chairman. But Tuesday’s markup also underscored how badly divided Democrats and Republicans remain on tax policy.

Longer extensions of tax extenders would give future tax writers more breathing room to keep key tax breaks or lower rates, after Camp’s broad tax reform draft this year was coolly received.

Liberal groups and budget hawks weren’t fans of Camp’s tax extenders measures, with the Committee for a Responsible Federal Budget arguing that the six tax breaks would cost more like $380 billion over a decade to extend.

A spokesman for the free market group Club for Growth, which opposed the Senate extenders package, said they were still reviewing the legislation.

But a range of business groups, from the American Farm Bureau Federation to the National Federation of Independent Business, backed the committee’s action.
 
Two dozen groups, including the National Association of Wholesaler-Distributors, backed one of the S corporation tax breaks, saying it would allow companies “to make decisions based on what is best for the company rather than the dictates of the tax code.”
 
Still, some business titans worried about how long it would take to get an extenders deal to President Obama’s desk.
 
“Failure to extend key expired provisions before Congress completes work on tax reform is fostering continued business uncertainty and will do further harm to America’s competitive position the longer the lapse continues,” said John Engler of the Business Roundtable.

— This story was updated at 5:41 p.m.