Race is on to restore tax breaks

House Ways and Means Chairman Dave Camp (R-Mich.) worked for more than three years to strip tax breaks out of the code, but is now pushing to extend some of them for good. 

The Ways and Means Committee on Tuesday will consider permanently extending six separate provisions that expired at the end of 2013, including the popular research and development credit used by a number of corporate heavyweights. 

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In all, the Joint Committee on Taxation says that extending all those tax breaks over the long-term would cost around $310 billion between 2014 and 2024, with half that total coming from just the research credit.

Camp, who has announced that he will not seek reelection this year, has cast his efforts to extend some of the so-called tax extenders permanently — and leave others on the scrap heap — as a way to offer more certainty to businesses and give a nudge toward his longstanding goal of overhauling the tax code.

“This is just the beginning of the conversation that we must have in order to overhaul the tax code so it's simpler and fairer for families,” Camp said at a hearing about the expired provisions this month.

Getting a deal on the tax extenders, the common term for the more than 50 incentives that expired at the end of last year, is widely seen as the one chance Congress has to enact major tax legislation this year.

Camp’s broader tax reform draft, released in February, got chilly reviews from even his fellow Republicans. 

But Camp’s push to extend some of the individual provisions — and a parallel effort by Senate Finance Chairman Ron Wyden (D-Ore) to do the same — also underscores the challenge of enacting tax reform.

On Tuesday, Ways and Means will also consider measures to permanently extend a tax break for small business expensing known as Section 179, and other preferences for both small businesses and multinational corporations.

All those provisions were extended in some form in Camp’s tax reform draft, which also killed roughly two-thirds of the 50 incentives that expired at the end of the year.

Camp’s tax reform draft also assumed that those tax breaks expired even though they are routinely extended for a year or two at a time, the same approach taken by Congress’s official budget scorekeepers.

But if those provisions were enacted permanently, Camp’s successor as tax-writing chairman — likely Rep. Paul Ryan (R-Wis.) — would have more revenue to play with in a rewrite the tax code.

In essence, tax writers would have an extra $310 billion to either lower rates or keep other tax breaks that could get axed in reform.

Still, Camp’s efforts could run into opposition from both the right and the left, even though many of the extenders have support from both sides of the aisle.

A spokesman for Club for Growth, the influential free market group, declined to comment on the permanent extensions, saying they would wait for Ways and Means to act.

But Chris Chocola, the club’s president, slammed a recent measure from Senate Finance Chairman Ron Wyden (D-Ore.) and Sen. Orrin Hatch (R-Utah) that extended most expired tax breaks for two years at a cost of some $85 billion. 

Chocola also sounded skeptical of the research and development credit, saying in a Wall Street Journal op-ed that it was a giveaway to profitable outfits like Google, Intel and Boeing.

Democrats who have supported the research credit have also noted that Republicans want to extend the tax breaks without paying for it, but are demanding offsets for extensions of unemployment benefits.

The liberal group U.S. PIRG also took issue with Camp’s decision to extend an incentive that allow multinationals to shift certain earnings around tax-free, and a tax break for offshore income for financial services companies.

“For all of the talk in Washington about getting our fiscal house in order, the committee isn’t discussing how to pay for these expensive tax breaks,” said Dan Smith of U.S. PIRG.

“When big multinationals use offshore loopholes to dodge taxes, average taxpayers and small business owners are the ones to foot the bill, coping with cuts to public programs, higher taxes, or a larger deficit.” 

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