Strategy on tax breaks eludes GOP

Strategy on tax breaks eludes GOP
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The House is scheduled to vote in the coming week to permanently extend several tax breaks, including a key incentive for small business expensing, that expired at the end of 2014. 

But don’t call it a strategy yet.

Congressional aides and lobbyists say that GOP lawmakers as a whole don’t yet have a handle on how to deal with the dozens of preferences, commonly known as extenders, that were at the center of a big fight just months ago.

House Majority Leader Kevin McCarthy (R-Calif.) suggested in his memo laying out the February agenda that the votes to revive the incentive for writing off small business purchases and certain tax breaks for charitable contributions were more for political messaging than for sketching out a path forward legislatively. 

“To build a healthy, opportunity economy, our tax code must protect hardworking taxpayers,” McCarthy wrote. “We don't need higher taxes. We need a more efficient, effective tax system.”

A spokesman for House Ways and Means Chairman Paul RyanPaul RyanRyan: Graham-Cassidy 'best, last chance' to repeal ObamaCare Ryan: Americans want to see Trump talking with Dem leaders Overnight Finance: CBO to release limited analysis of ObamaCare repeal bill | DOJ investigates Equifax stock sales | House weighs tougher rules for banks dealing with North Korea MORE (R-Wis.) added that the approach after the February votes had yet to be determined. Republicans on the tax-writing panel huddled in Warrenton, Va., this week to discuss the committee agenda.

Meanwhile, on the other side of the Capitol, “the Senate hasn’t made any final decisions on how to approach extenders this year,” an aide said Friday.

Figuring out how to restore the more than 50 tax breaks – which include incentives for business research and underwater homeowners – has become a regular tradition on Capitol Hill. 

House Republicans employed a similar approach – permanently extending some of the provisions – in 2014, winning the votes of some Democrats while many others objected that the proposals would heap billions on to the deficit. The collection of tax breaks have a broad range of defenders on K Street and the business community, which frequently call on Congress to pass an extenders package.

The Senate’s top Democrat, Harry ReidHarry ReidThe Memo: Trump pulls off a stone-cold stunner The Memo: Ending DACA a risky move for Trump Manchin pressed from both sides in reelection fight MORE (Nev.), and former House Ways and Means Chairman Dave Camp (R-Mich.) almost struck a deal after November’s election to bring back for good roughly 10 of the preferences – including charitable breaks and the quicker write-offs for small business – and revive others for two years. 

But that emerging deal fell apart, illustrating Democratic divisions in the process, and the tax breaks that had expired at the end of 2013 were only restored until the end of 2014 – or, just weeks after the measure cleared Congress. 

Ryan, Senate Finance Chairman Orrin HatchOrrin Grant HatchFinance to hold hearing on ObamaCare repeal bill Overnight Finance: CBO to release limited analysis of ObamaCare repeal bill | DOJ investigates Equifax stock sales | House weighs tougher rules for banks dealing with North Korea Week ahead in finance: Clock ticking for GOP on tax reform MORE (R-Utah) and GOP leaders in both chambers will have to craft a plan on the tax breaks as they continue to chart a path for tax reform, and discuss President Obama's preference to revamp how U.S. businesses pay taxes.

Lawmakers and lobbyists are skeptical that a tax reform deal will get struck in the coming months. 

But extending some of the temporary tax breaks for good would make the budget math easier for reform, because lawmakers would no longer have to find offsets elsewhere in the tax code to keep the incentives. 

That approach, though, would also make it harder for House Budget Chairman Tom Price (R-Ga.) and Senate Budget Chairman Mike EnziMichael (Mike) Bradley EnziWe can't allow Congress to take earned benefits programs away from seniors Senate approves Trump's debt deal with Democrats Senate panel might not take up budget until October MORE (R-Wyo.), both of whom are also tax writers. The two chairmen would have to find more spending cuts elsewhere to bring their budgets to balance if they included incentives that the House has passed permanently.

On the other hand, Ed Lorenzen of the Committee for a Responsible Federal Budget said the chairmen would face "criticisms about hypocrisy" and call into question "the credibility of the budget" if they don't incorporate legislation the House has already passed.