Tax Extenders Could Return from the Grave Mid-Filing Season

February 1, 2019

The “tax extenders,” a set of tax provisions that have been temporarily continued for more than a decade, are back. These provisions have been expired for over a year now, but Senate Finance Chairman Chuck Grassley (R-IA) and House Ways and Means Chairman Richard Neal (D-MA) have said that extenders are once again under discussion. Continuing these temporary provisions has never been a good idea, but doing so in the middle of filing season could make matters worse.

Nearly all the extenders either were made redundant by the Tax Cuts and Jobs Act or are poor policies that should be left expired. Many are narrow provisions favoring specific industries, making the tax code less fair. Others overlap with provisions from the Tax Cuts and Jobs Act concerning the tax treatment of investments and so are no longer necessary. Only two extenders could be reasonably defended, depending on congressional priorities, and even these would be better as permanent policies, rather than temporary provisions.

Tax extenders also often fail in their stated purpose of encouraging certain activities. As my colleague Erica York has written,

Because of their often-retroactive nature, these provisions result in an after-the-fact transfer to narrow groups without incentivizing the intended activity—businesses and individuals cannot go back in time and make different decisions. This temporary, uncertain nature also makes it increasingly difficult for businesses and individuals to engage in long-term decision-making as they do not know which tax provisions will be in effect in the future. The economic uncertainty created by these provisions slows economic growth.

The 2018 tax filing season is full of uncertainty, and changing the tax code partway through by passing an extenders package would only compound that uncertainty. Reauthorizing extenders now would require the Internal Revenue Service (IRS) to update and publish new tax forms, and taxpayers who have already filed would then need to go through the costly and confusing processing of amending their returns.

Chairman Grassley has said that there is “a real effort to reach an agreement on extenders,” although it’s uncertain whether there’s enough momentum for lawmakers to address these provisions. Despite Congress’ continual renewal of these provisions, the best agreement to reach would be leaving the extenders expired for good.

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