As the Congress works to authorize federal spending for the current fiscal year amid the bitter, ongoing political fights, it is also working to authorize the array of tax credits that negotiators typically work out annually.
This year’s package was unveiled Tuesday, and, “as usual, is intended to transcend partisan bickering and allow lawmakers to dole out special-interest tax breaks credits “that were set to expire or had already ended.”
The temporary nature of those benefits tends to set off a year-end scramble, NYT says, with lawmakers trying to aid businesses and entities that have come to depend on them.
Among the biggest changes tucked into this year’s agreement is the elimination of taxes intended to fund the Affordable Care Act, including a tax on medical devices, health insurers and generous health plans. That tax had never gone into effect and the House voted overwhelmingly to repeal it this year.
The health insurance tax, which applied to health insurers and the medical device tax, has been sporadically carried out, NYT said.
This year’s deal, which passed the House as part of an overall spending plan for eight agencies 297 to 120 on Tuesday, also extends tax benefits for railroad track maintenance, racehorse and racetrack ownership, hiring and investment on Native American reservations and some victims of natural disasters. A one-year extension was given to winemakers, beer brewers and liquor distillers allowing them to avoid tax increases of as much as 400 percent.
It also extends a handful of credits for renewable energy, like wind production, but does not include an extended credit for the buyers of electric cars, the Times emphasized.
Congressional staff and lobbyists were referring to Tuesday’s agreement as a “skinny” deal, which fell short of both Democratic and Republican ambitions and could have included additional aid to low-income families and fixes for errors written into the sweeping package of tax cuts signed in 2017.
This year’s deal also highlights the inability of the administration’s tax cuts to reduce businesses reliance on targeted credits and other breaks. The 2017 tax package that cut the corporate rate to 21% was intended to reduce the need for specialized tax breaks that had been good for lobbyists but costly and inefficient for taxpayers.
Those provisions were usually made temporary for budgetary reasons and allowing lawmakers to provide breaks without adding to the 10-year federal budget deficit. But many have routinely been renewed “continuing to add to America’s fiscal woes,” the Times said.
The provisions in the current deal could add more than $427 billion to the federal debt over the next decade, according to the congressional Joint Committee on Taxation. Maya MacGuineas, the president of the Committee for a Responsible Federal Budget, said “there isn’t a single credible justification to defend it.”
Negotiators reached the deal hours before they were set to vote on spending legislation to keep the government fully funded through the end of the fiscal year. The extenders, through a procedural maneuver on the House floor were to be attached to one of the spending packages up for a House vote that then will go to the Senate which expects to take up the legislation before government funding expires on Friday, the Times said.
Congressional staff said that a broader agreement including more tax credits had been “at hand” earlier but that White House officials and Treasury Secretary Steven Mnuchin ultimately rejected it. Secretary Mnuchin pushed for any larger deal to include the relief for restaurant owners, they said, but Democrats were unwilling to support it without more in return on their priorities.
The deal as agreed to includes a few reversals from the 2017 law. It eliminates a tax increase that hit the children and spouses of deceased members of the military, along with a new tax that was set to hit churches and other nonprofit organizations that offer parking to their employees.
Other tax break winners include movie, television and theater producers and “energy efficient” homes—as well as owners who install electric charging station or other types of renewable refueling in their principal residence. However, supporters of renewable energy generally panned the package, saying it does little to incentivize a shift to cleaner power.
So, we will see. Politico emphasized that the House bill included a $15 billion tax break for biodiesel through 2022 that Sen. Chuck Grassley, R-Iowa, and other Midwestern members were pushing to benefit “states where biodiesel plants shut down throughout the year.”
The bill would also renew through 2020 a 46-cent-per-gallon credit for production of cellulosic and algae-based fuels and it would extend a special allowance for biofuel plant property.
So, we will see. Clearly, the current package includes significant benefits for producers and should be watched closely as it proceeds, Washington Insider believes.
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