NCPA - National Center for Policy Analysis

The Senate Can Use Tax Extenders as an Opportunity to Improve the Tax Code

August 6, 2015

The tax extenders are a group of approximately 50 tax-reducing policies that expire regularly. Congress has traditionally extended them just as regularly as they expire. Late last year, Congress retroactively renewed them for 2014, which means they are currently expired. If Congress insists on paying for their extension by raising other taxes, it will create an oxymoronic condition where it is raising some taxes to prevent raising others. And, of course, raising taxes is not sound policy. The various provisions in the package are of varying merit as they pertain to tax neutrality. Congress should go through each individual policy in the extenders package and evaluate them on their necessity for neutrality.

Policies that particularly harm the neutrality of the tax code that Congress should eliminate include:

  • Renewable electricity production credit and the optional investment credit (better known as the wind tax credits).
  • Credit for construction of homes designated by the government as energy efficient.
  • Enhanced mass-transit subsidies.
  • New-markets tax credit.

Congress should treat the elimination of unsound policies in the tax extenders as a small-scale tax reform and institute pro-growth changes in the tax code that reduce taxes by the amount of revenue that eliminating unsound policies would raise. A few places Congress could look to make incremental improvements that would strengthen the economy include:

  • Expanding section 179 expensing so small businesses can expense all of their capital expenditures.
  • Exempting taxpayers from paying interest on all or a portion of their savings.
  • Making it easier for all families to save more for whatever reason they deem necessary.

Source: Curtis S. Dubay, "The Senate Can Use Tax Extenders as an Opportunity to Improve the Tax Code," Heritage Foundation, July 28, 2015.


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