Congress letting 55 tax breaks expire at year end
Tuesday, December 31, 2013
WASHINGTON (AP) — In an almost annual ritual, Congress is letting a package of 55 popular tax breaks expire at the end of the year, creating uncertainty — once again — for millions of individuals and businesses.
Lawmakers let these tax breaks lapse almost every year, even though they save businesses and individuals billions of dollars. And almost every year, Congress eventually renews them, retroactively, so taxpayers can claim them by the time they file their tax returns.
No harm, no foul, right? After all, taxpayers filing returns in the spring won’t be hurt because the tax breaks were in effect for 2013. Taxpayers won’t be hit until 2015, when they file tax returns for next year.
Not so far. Trade groups and tax experts complain Congress is making it impossible for businesses and individuals to plan for the future. What if lawmakers don’t renew the tax break you depend on? Or what if they change it and you’re no longer eligible?
“It’s a totally ridiculous way to run our tax system,” said Rachelle Bernstein, vice president and tax counsel for the National Retail Federation. “It’s impossible to plan when every year this happens, but yet business has gotten used to that.”
Some of the tax breaks are big, including billions in credits for companies that invest in research and development, generous exemptions for financial institutions doing business overseas, and several breaks that let businesses write off capital investments faster.
Others are more obscure, the benefits targeted to film producers, race track owners, makers of electric motorcycles and teachers who buy classroom supplies with their own money.
A deduction for state and local sales taxes benefits people who live in the nine states without state income taxes. Smaller tax breaks benefit college students and commuters who use public transportation.
A series of tax breaks promote renewable energy, including a credit for power companies that produce electricity with windmills.
With Congress on vacation until January, there is no chance the tax breaks will be renewed before they expire. And there is plenty of precedent for Congress to let them expire for months without addressing them. Most recently, they expired at the end of 2011, and Congress didn’t renew them for the entire year, waiting until New Year’s Day 2013 — just in time for taxpayers to claim them on their 2012 returns.
But Congress only renewed the package though the end of 2013.
Why such a short extension? Washington accounting is partly to blame. The two-year extension Congress passed in January cost $76 billion in reduced revenue for the government, according to the nonpartisan Joint Committee on Taxation. Making those tax breaks permanent could add $400 billion or more to the deficit over the next decade.
More like this story
Use the comment form below to begin a discussion about this content.
Please review our Policies and Procedures before registering or commenting