For years, Congress has enacted laws to provide an incentive for taxpayers to engage in activities that are good for the country, such as job creation, capital investment and utilizing alternative energy like wind, solar and biodiesel. These incentives are most effective when taxpayers can rely on them during the tax year and know that they will exist for a certain duration ahead of time.
However, Tax Day has come and gone and Congress still hasn’t provided certainty to individuals and business owners who engaged in these kinds of encouraged activities on the assumption that Congress would extend the tax provisions as it had year after year before.
For example, if a biodiesel plant in Iowa invests in hiring more personnel and expanding its operation because of a federal tax credit or deduction, it’s not fair to leave that plant in limbo while Congress engages in partisan policy battles. It also doesn’t make sense from a basic investment planning perspective. A private company is only going to use a tax benefit and invest when it knows the provision is going to be around for a certain duration.
Federal uncertainty undermines the efficacy of temporary tax credits, deductions and other benefits because individuals and businesses will be hesitant to invest on shaky grounds. That makes the behavior that Congress is trying to encourage less likely to happen. That’s no way to govern.
Congress has a bad habit of waiting until the last minute – or months after – to extend temporary tax policy. I’ve been working to extend more than two dozen tax provisions that have expired since the end of 2017. It’s important for these tax extenders to be enacted through the end of this year not only to provide certainty to those who rely on them, but also to give Congress time to evaluate each one and identify longer-term solutions.
Last week, along with my Democratic colleague Senator Ron Wyden, I announced that the Finance Committee has formed five taskforces, made up of bipartisan members of the Committee, to examine 42 tax provisions. Each taskforce will focus on provisions that either already expired or will expire, between December 31, 2017 and December 31st of this year.
These taskforces will explore temporary tax policies within one of five issue areas, including workforce and community development, health taxes, energy, business cost recovery and a combined group consisting of individual taxes and other temporary policies. They’ll review the original purpose of each policy and whether it’s still necessary. If so, the taskforces will be responsible for identifying possible solutions that would provide long-term certainty in these areas.
Solutions may vary from phasing out the credit or deduction over a period of time, to being scaled back or eliminated completely. Some provisions may also be extended without reform. For those, the particular taskforce will need to determine whether a continued short-term extension would work to achieve its policy goals, whether a longer-term extension is needed to force Congress to reevaluate the provision down the road, or if the provision should be made permanent. Ultimately, the job of these taskforces is to identify reform proposals so Congress can end the unfortunate practice of kicking the can down the road, one year at a time.
There will also be a taskforce to examine temporary disaster tax relief and examine whether Congress should move forward with a core set of permanent proposals. The purpose would be to ensure that taxpayers who have suffered through devastating disasters don’t have to wait for Congress to act before they can start rebuilding their lives, small businesses or farms.
Each taskforce has already begun its work, which will be finished by the end of next month. From there, we can effectively move forward to fix the seemingly never-ending problem of short-term tax extensions. The bottom line is that if Congress is going to use temporary tax policy, taxpayers should be able to count on it.