One More Year of Tax Extenders: Paving the Way for Reform in 2015

Yesterday, the House passed a one-year extension for the “tax extenders”—a package of approximately 50 tax-reducing policies that expired at the end of 2013. The one-year extension would retroactively reinstate the policies for 2014, but no further. The Senate will vote on the extension next.

Last week, President Obama torpedoed—with a veto threat—a potential deal to permanently extend some of the provisions and extend all the others for two years.

The tax extenders are a mixed bag of sound policies and policies that Congress should have abolished long ago. A one-year extension means that the good policies will be extended, as will those that are unjustified.

Given the desire of the Senate and President Obama to retain the unjustified policies, a one-year extension is sensible because it prevents a tax hike and keeps in place many policies necessary for a better functioning tax system.

Because the extenders would again expire in a few weeks, it also gives the incoming Congress an opportunity to do the right thing and finally extinguish the bad policies in the tax extenders once and for all.

The best way to accomplish that is to examine each of the individual policies in the package one by one and determine whether they represent sound policy. Those that pass the test, Congress should make permanent. Those that do not, Congress should put on the ash heap of tax history.

To prevent a tax hike, Congress should make pro-growth changes to the tax code that lower revenue by the same amount that abolishing the bad tax extenders would raise.

Earlier this year, the House Ways and Means Committee essentially followed this procedure. Unfortunately, the Senate did not follow suit and instead wanted a two-year extension for all the policies.

The one-year extension for all policies should be the last time that Congress gives a pass to the harmful policies in order to keep the sound policies in place. The new Congress should follow the process laid out above so that it can finally put an end to the bad polices.