CHN: Congress Passes $41.6 Billion of Tax Cuts for Businesses
As its last piece of business before adjourning the 113th Congress, the Senate passed (76-16) a package of temporary tax breaks (H.R. 5771) that will mostly benefit corporations. The legislation, which passed the House (378-46) earlier in December, costs $41.6 billion and is not paid for with increased revenues or offsetting spending cuts. The roughly 50 tax cuts, known as “extenders,” expired at the end of 2013; the legislation that was passed, however, was only a one-year retroactive extension to cover 2014, which means Congress will have to deal with these breaks again next year, either through another extension, allowing them to expire (not likely), making them permanent at a huge cost to taxpayers, or comprehensive tax reform. Because of the retroactive nature of the bill, whatever investment incentive these business and energy tax breaks might have provided was lost, and the legislation essentially rewards businesses for actions they already took earlier in the year.
H.R. 5771 was the agreed-upon solution after President Obama threatened to veto a deal that had been in the works the week of Thanksgiving to extend some of the tax cuts and make others permanent at the cost of $450 billion over ten years. Neither the proposed deal nor H.R. 5771 make permanent the improvements in the Child Tax Credit and Earned Income Tax Credit that help low-income working parents and their children, which are scheduled to expire in 2017. The failure to preserve these improvements for working families while deepening the deficit with such large business tax breaks were the reasons stated by the Administration for its veto threat.
Citizens for Tax Justice has been on the forefront of calling for greater scrutiny on the merits of the tax extenders. In a report released in May, they outline why they believe that many of these tax cuts do not benefit the economy and are poor policy, or should be funded through direct spending, not the tax code. They also released a new report and commentary on the problems with H.R. 5771. For more background on the tax extenders package, see CHN’s October 7 Human Needs Report.