Sometimes it’s possible to predict a legislative outcome by comparing opening statements and testimonies of committee witnesses.

Of the 60 temporary tax provisions that expired at the end of 2011, most were considered traditional extenders, sure to be legislatively re-enacted at some point. In fact, the very fact that they are called “traditional tax extenders” raises questions about their temporary nature and makes it hard to argue that they are not fixtures of the Tax Code, according to Dr. Rosanne Altshuler, professor and chair of the Department of Economics at Rutgers University.

“With some exceptions, each was originally enacted with an expiration date and every one of those dates subsequently has been extended,” she told the committee in its hearing on “Extenders and Tax Reform: Seeking Long-Term solutions.”

“In most cases, these temporary provisions have been extended over and over again for just a couple of short years or less,” she said.

Altschuler urged that the traditional extenders either become permanent features of the Tax Code or permanently expire.

Temporary tax provisions should be avoided, agreed Jason J. Fichtner, senior research fellow at the Mercatus Center at George Mason University. “An environment conducive to growth (and thus, increased revenues as a result of a larger economy) requires a Tax Code that provides both near and long-term predictability,” he said.

“Further, instead of focusing on ways to increase revenue, focus should be directed on ways to increase economic growth, saving, and investment; a larger economy will rewult in larger tax revenue,” he added. “We don’t just need more revenue—we need a better revenue system.”

Caroline Harris, chief tax counsel for the U.S. Chamber of Commerce, agreed that comprehensive, fundamental tax reform is essential, but given that such reform appears to be a long way off, she urged Congress to take action on the annual extender provisions immediately.

“The Chamber appreciates that all tax policies, including these annual extender provisions, must be carefully examined in the context of fundamental tax reform. However, we must not delay these provisions while we engage in that debate,” she said.

The extender items, in general, are subsidies delivered through the tax system, observed Calvin H. Johnson, a professor at the University of Texas School of Law. “They are exceptions to the normative rule that ‘taxable income’ needs to describe accurately the standard of living of the taxpayer,” he said. “These are almost all accounting or tax gimmicks.”

Johnson submitted a list of provisions, dividing it between those that should expire, those that need to be reworked to cut out fat in the program, and those that the government does not know enough to know whether it is getting its money’s worth in terms of cost.

Both Senators Max Baucus, D-Mont., and Orrin Hatch, R-Utah, chairman and ranking member, respectively, of the Senate Finance Committee, gave their qualified blessing to passing extenders. “So as we work to pass tax extenders through this year, let us also continue the hard work of tax reform,” said Baucus. “Let us consider whether we should retain these provisions, or whether we should use the money to lower tax rates.”

“Chairman Baucus and I agree, along with many of our colleagues, that the current Tax Code demands comprehensive reform,” said Hatch. “In the meantime, before tax reform is accomplished, Congress needs to decide what to do about the tax extender provisions that have expired.”

Given the slow pace of any projected tax reform, especially in an election year, and the perceived necessity of the extenders, it is likely that Congress will pass at least most of the extenders at some point. Maybe not today, maybe not tomorrow, but by the end of the year and for at least another year.

Register or login for access to this item and much more

All Accounting Today content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access