Yesterday, the House Ways and Means TaxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. Policy subcommittee held a hearing to evaluate a set of recently expired tax provisions, commonly referred to as “tax extenders,” and whether they are needed under the newly reformed tax code. Most of the tax extenders in question are narrowly targeted preferences for specific economic interests, such as electric vehicles or live theatrical productions. Yesterday’s hearing was a promising first step for Congress to evaluate which, if any, extenders are good policy worth permanence and which should be eliminated for good.
Several common themes were repeated during yesterday’s hearing, including:
- These provisions might not be necessary given the recent tax reform efforts that included rate cuts and full expensingFull expensing allows businesses to immediately deduct the full cost of certain investments in new or improved technology, equipment, or buildings. It alleviates a bias in the tax code and incentivizes companies to invest more, which, in the long run, raises worker productivity, boosts wages, and creates more jobs. (temporarily). The idea of tax reform was simplification and growth, not narrow, often retroactive benefits. Each provision must now go through a “rigorous test” to examine whether they fit in the new tax code.
- If a provision is determined to still be needed, something should be given up to finance it. Several committee members expressed concerns with continually extending provisions without paying for them.
- If a provision passes the “rigorous test” and is determined to be needed, then it must become part of the permanent tax code instead of being temporarily extended.
- Temporary and retroactive tax policy is not effective and does not allow businesses to plan with certainty, impacting how they will invest.
Given that lawmakers didn’t make these expired provisions permanent during the debate over the Tax Cuts and Jobs Act, it signals that Congress already knows most of the remaining extenders are not must-pass policies. The Tax Policy subcommittee’s hearing seemed to indicate broad support for stopping the tax extenders ritual, evaluating the merit of each provision under the new tax code, and moving in the direction of permanent tax policy.
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