Last night, the Senate will passed a set of 50-ish tax breaks in a package known as the “extenders.” Among them are loopholes that allow companies to hide profits overseas which cost taxpayers $6.2 billion.
Technically, all of these tax breaks were expired. The expectation is that the Senate will reinstate these tax breaks retroactively so that apply to the all of 2014 tax returns.
This was characterized as “critical business” for the Senate — essential to complete prior to the end of the year in order for businesses to include these tax breaks on their tax returns. In fact, Senate Majority Leader Reid made the extender vote the Senate’s last piece of business so he can entice more senators to stay in town, allowing him to handle more procedural votes — assuming that once the extenders are voted on, everyone will go home. But … are these tax breaks so critical they can’t be debated?
The answer has more to do with the way power works in Washington than what these tax breaks do for our economy.
Take for example one tax break that rewards companies for buying equipment. Surveys have shown that companies don’t make huge organizational purchases because of a small tax credit, and that this tax break has no impact on their spending patterns. But not only are we supposed to believe, against the evidence, that this tax break is a wise use of our money, we are expected to believe that reinstating the tax break will change purchases that are already made. I know that politicians like to claim “I’m no scientist,” but it seems that they have advanced theories about the space-time continuum.
Here’s one thing that you don’t need to watch Star Trek to understand: This tax break drains millions out of the budget, and adds to the deficit and undercuts spending priorities. That much is plain. You can read more from the FACT Coalition (Fair Share is on the FACT steering committee).
Part of our goal during this tax extender debate was to try and pop the bubble around these breaks. Part of the fruit of those efforts is the renewed energy around corporate tax reform. We expect both parties to take up this issue in the coming year.
It was notable that Sen. Warren and 15 other senators opposed this package — for many different reasons and from both parties. Some because they opposed the content of the extenders and others because it didn’t go far enough or last long enough.
I’m no scientist, but I imagine that the companies who reap millions upon millions of dollars on these tax breaks will be lining up to protect their interests as the debate continues. But so will we.