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Legislative Update
 

November Election

March 22, 2019

Ways and Means Subcommittee Hearing on Tax Extenders


Background

Last week, Ways and Means Select Revenue Measures Subcommittee Chairman Mike Thompson (D-CA) held a hearing on temporary tax provisions, including specific energy tax provisions (e.g. credits for geothermal or biofuels) which expired in December 2017.  This comes as pressure is mounting to extend them again before taxpayers complete their 2018 returns in April.   The hearing’s witnesses included:

  • Mark Mazur - Robert C. Pozen Director, Urban-Brookings Tax Policy Center (Testimony)
  • Pam Olson - U.S. Deputy Tax Leader and Washington National Tax Services Leader, PricewaterhouseCoopers (Testimony)
  • Chye-Ching Huang - Director of Federal Fiscal Policy, Center on Budget and Policy Priorities (Testimony)
  • Judy K. Sakaki - President, Sonoma State University (Testimony)
  • Kyle Pomerleau - Chief Economist and Vice President of Economic Analysis, Tax Foundation (Testimony)

 

Analysis

This hearing was intended to be an opportunity for new committee members to weigh in and learn about tax extenders—the 29 or so temporary tax provisions that expired in December 2017, including specific energy tax credits like those for geothermal power or biofuels.  Chairman Thompson urged the committee to extend them as quickly as possible, as their expiration has left taxpayers and businesses in limbo.  He specifically argued that the uncertainty around the energy provisions limited the deployment of clean energy technology, something echoed by several more members of the majority.  Chairman Thompson also drew a distinction between these temporary provisions and those in the Tax Cuts and Jobs Act, which, he argued, were made temporary to hide their true cost.  He believes that deception to be irresponsible and dishonest, and suggested paying for all tax law changes going forward—permanent or temporary—including tax extenders themselves.

 

There was a general—not perfect—consensus that tax extenders needed to be addressed as quickly as possible.  The energy provisions and the short line rail credit were specifically mentioned.  No solution, however, emerged, as the hearing quickly descended into a back and forth on the merits and shortcomings of the Tax Cuts and Jobs Act.  Democrats criticized the unequal benefits of the law’s changes and argued that permanently extending temporary provisions from the Tax Cuts and Jobs Act would cost close to $2 trillion and benefit top income earners most.  Republicans on the other hand extolled the economic growth and investment their signature accomplished spurred.

 

Next Steps

The future of tax extenders remains very much in doubt.  Senate Finance Committee Chair Chuck Grassley (R-IA) remains committed to extending them, including a permanent solution to the biodiesel tax credit.  He and Ranking Member Ron Wyden (D-OR) recently introduced legislation to extend these provisions for another two years (i.e. 2018 and 2019), and now it appears that Ways and Means Chairman Neal will schedule a tax markup for some time in April, which may include legislation on extenders.  Mounting pressure in the House, however, to pay for another temporary extension of these provisions is a non-starter in the Senate.  Both Grassley and Wyden continue to maintain that Congress has not, should not, and will not pay to temporarily extend expired tax provisions.  It appears that they are willing to forego an extenders package rather than a) find payfors or b) change longstanding precedence on not paying for temporary tax provisions.

 

That said, key policymakers continue to work to bridge that divide.  In an ideal world, an extension would be completed by April 15—the due date for filing individual tax returns.  Most experts agree that if an extension is passed by both chambers, however, it will be sometime this summer—still ahead of the due date for extensions in October.