The U.S. House of Representatives will likely vote tomorrow to continue about 50 expiring tax incentives known as “tax extenders.” It must do so each year to prevent significant tax increases for some taxpayers.
This year, however, the House will likely pass increases in other taxes to offset the supposed cost of the tax extenders. This is nothing more than Congress hiding behind the guise of fiscal discipline as an excuse to raise taxes year after year. Continuing the tax extenders is not a tax cut. It is the prevention of a tax hike. Therefore there is no need to raise other taxes to pay for them.
The yearly dance Congress goes through in regard to paying for the tax extenders is the result of a faulty revenue baseline constructed by the Congressional Budget Office (CBO). The flawed baseline impacts debates about the Alternative Minimum Tax (AMT), the death tax and others. It prevents the permanent extensions of these important tax reductions and puts many taxpayers at risk for steep tax hikes each year. Congress should require the CBO to correct this flaw to its revenue baseline. That way it will not wrongly seek to raise taxes to continue current tax policies like the tax extenders, the AMT, the death tax, and others.
Regardless of the CBO baseline problems, Congress should not pass tax hikes to pay for extensions of current tax provisions. This applies to the tax extenders, the death tax and any other expiring tax reducing provisions that are part of current policy.