Tax extenders may trump tax reform

GOP tax writers in the House, holding out hope for their reform efforts, could end up jamming themselves in negotiations over extending a raft of expired tax breaks.

Republicans on the Ways and Means Committee have said throughout the current Congress that they’ll deal with the targeted tax incentives commonly known as extenders only when they broadly overhaul the tax code.

The problem is, even some of tax reform’s biggest backers on Capitol Hill say they don’t think the code can be rewritten this year.

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That means that House GOP tax writers, who have previously shown an interest in paring back the number of extenders, could get stuck with a package they had no role in crafting.

But for now at least, Ways and Means Chairman Dave Camp (R-Mich.) and other top GOP tax writers say that the chance to go after tax reform is well worth the risk on extenders.

“We’ve got a lot of time before the end of the year,” said Camp, who is scheduled to give up the Ways and Means gavel in 2015. “Clearly, I think the path I want to take is comprehensive tax reform. So I haven’t given up on that yet.”

A similar scenario played out roughly a year ago, when a Senate Finance extenders measure unpopular among House Republicans was tucked into the fiscal cliff deal at the last moment.

But Rep. Pat Tiberi (R-Ohio), a senior Ways and Means member, has stressed that extenders are not high on the list of priorities, and that extending the lapsed provisions only serves to blunt the momentum for reform.

“It’s not a question of if tax reform happens – the question is when. We have to do it,” Tiberi told The Hill. “Democrats and Republicans agree that we have to do it. So it’s absolutely worth a shot.”

More than four dozen temporary tax breaks expired at the end of 2013, ranging from the research credit used by many businesses and a credit prized by the wind industry to narrower provisions dealing with Puerto Rican rum production, NASCAR tracks and thoroughbred racing.

But while those provisions could be handled in a broad tax overhaul, Camp and Senate Finance Chairman Max Baucus (D-Mont.) had trouble gaining traction for their reform efforts for much of 2013, facing resistance among party leaders in both chambers.

President Obama’s announcement last month that he was nominating Baucus to be his ambassador in Beijing only deepened the skepticism among lawmakers and lobbyists that a tax reform deal could be struck in 2014.

“It’s very difficult to make a case that we have enough time to do tax reform in a political year like this,” said Sen. Orrin Hatch (Utah), the top Republican on the Finance panel. “I’m for it. Love to do it if we can. But the odds are definitely against a full tax reform bill.”

Like Camp, Baucus said for much of last year that he was more interested in dealing with extenders as part of tax reform.

But the Finance chairman started sounding more open to dealing separately with the expired tax breaks late last year, around the same time his nomination to be China envoy leaked out.

Baucus said this week he was discussing a range of issues on extenders with other senators, including if there would be a mark-up and if an extension of the tax breaks needed to be offset.

Senate Democratic leaders have also shown a keen interest in extending the expired provisions, seeking to push a measure through at the end of last year.

Republicans thwarted that effort, but Democrats say that extending the expired breaks will give businesses and taxpayers more certainty this year, even as work on tax reform continues.

Sen. Chuck Schumer (D-N.Y.) has especially gone to bat for a provision that helps commuters using mass transit. Sen. Ron Wyden (D-Ore.), widely assumed to be the next Finance chairman and a big proponent of tax reform, has nonetheless said that he doesn’t want extenders for renewable energy to fall by the wayside.

Hatch said recently that he thought a newly announced trade deal and negotiations over the so-called Medicare “doc fix” would be higher priorities than extenders in what are expected to be Baucus’s final weeks with the Finance gavel.

But Hatch also said he’s open to discussing extenders this year, though he wants to carefully examine the list of incentives to see which can be left on the cutting room floor.

Hatch worked with Baucus to craft Finance’s 2012 extenders package, but said they were only able to trim a “relatively minor” number of provisions.

“I’m always for doing. But if we do it, I want to cut back on the spending,” Hatch said. “Because there’s a lot of junk in there. We ought to get wise as far as extenders go.”

For Tiberi, that sort of talk gives House Republicans even more reason to go for broke on reform. Camp, for instance, has proudly cited the House GOP’s efforts to eliminate more than 70 extenders in 2010.

“I think there is, at least on the Senate Republican side, a bigger concern about paying for things,” Tiberi said.