This week, the Senate is expected to consider the Expiring Provisions Improvement, Reform, and Efficiency (EXPIRE) Act of 2014 (S. 2260) sponsored by Sen. Ron Wyden (D-OR). The EXPIRE Act would temporarily extend more than 50 expiring tax provisions pertaining to individual and business taxpayers and the energy sector through 2015.
The Senate’s tax extenders — and indeed the entire process surrounding the extension of expiring tax provisions — is one of the most egregious examples of Washington using its powers to prop up well connected interests.
For example, the Senate package includes over a dozen targeted tax provisions aimed at energy production, most of which are geared toward so-called green energy. According to the Heritage Foundation, Congress designed many of the provisions to “artificially tilt the energy market in the direction of certain renewable sources or reward certain taxpayers for behaving how the government would like them to.” Others are “narrowly tailored so only certain industries can benefit, which is unfair.”
The largest of those is the Wind Production Tax Credit, or Wind PTC, which was put in place in 1992 to spur investment in wind-generated energy. The Heritage Foundation’s Nicolas D. Loris explains the 2.3-cents-per-kilowatt-hour handout should remain expired:
Rather than creating a sustainable industry, the PTC has artificially propped up an industry, advanced special interests, and allocated labor and capital away from more competitive uses in the marketplace. It is time to allow the PTC to sunset one final time and remove all preferential treatment in the energy industry.
The EXPIRE Act’s other market-distorting energy provisions include various types of tax preferences (credits, expenses, deductions) for: construction of energy efficient new homes; energy efficient commercial building; mine rescue team training and mine-safety equipment; energy efficient appliances; alternative fuel vehicle refueling property; alternative fuel and alternative fuel mixtures; biodiesel and renewable diesel; electric drive motorcycles and 3-wheel vehicles; and second generation (cellulosic) biofuel producer credit.
Furthermore, there are numerous examples of provisions that “are narrowly construed to apply only to certain industries.” Examples includes shorter depreciation schedules for NASCAR, the horseracing industry, railroad track maintenance, mass transit and certain film and television productions. Congress should pursue fundamental tax reform that moves all business’s capital expenditures closer to full expensing without picking winners and losers among certain well-connected industries.
While various provisions within the package may have “merit as they pertain to tax neutrality,” the EXPIRE Act makes no substantive reforms and thus does nothing to advance the overall goal of tax reform. Instead, special interest tax provisions have been allowed to take advantage of the system by hitching a ride along with those provisions which may have merit, to the detriment of tax neutrality and a sound tax system. As Heritage has laid out, Congress should instead review each of the tax extenders individually on their own merit, not allow anti-competitive provisions to hide within larger logrolling efforts. Continuing to pass large, short-term extenders without scrutiny is anathema to fundamental tax reform and continues to contribute to taxpayers well-deserved distrust of Washington.
Finally, it is important for lawmakers to understand “reviving once again a repeatedly-extended tax policy is not a tax cut…so there is no need to offset their ‘cost.’” While the EXPIRE Act does not fall into this trap, the Obama administration is trying to use the package as a vehicle to further increase taxes on the American people.
Heritage Action opposes S. 2260 and will include it as a vote on our legislative scorecard.
Heritage Action Scorecard
Heritage: Tax Extenders an Opportunity to Improve the Tax Code
Fox News: To win in 2014 we need an anti-cronyism, anti-corporate welfare agenda
Heritage: Cutting short the ‘extenders’ would boost the economy