Buried within more than 2,300 pages of legislation authorizing more than $1.4 trillion in spending is a collection of special interest tax incentives dumped into two crucial budget bills at the last minute—including tax breaks for racehorses, breweries, and biofuels.
Regardless of the merits of any of those individual policies, their last-second inclusion in massive, must-pass budget bills is more evidence that Congress' budget-making process is broken.
The House voted Tuesday to pass the two budget bills that must be signed by President Donald Trump before next week in order to avert a government shutdown. The Senate is expected to vote on the bills before the end of the week.
"What a bucket of garbage this bill is," tweeted Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a nonpartisan group that advocates for reducing the deficit. The last-second inclusion of so-called "zombie extenders"—temporary tax breaks, including some that had previously expired as far back as 2017—is "simply moronic," she wrote in a follow-up tweet.
Producers of biodiesel and the owners of short-line railroads (rail lines that connect to regional or national rail networks) stand to score some of the biggest Christmas presents once Congress passes the budget bills. Both interests had seen special tax breaks expire in 2017, but will now get retroactive tax breaks to cover the past two years and further tax breaks through 2022, according to The Wall Street Journal.
All told, there are more than two dozen industry-specific tax incentives included in the budget bills, Bloomberg reports. That includes one-year extensions for tax credits given to breweries, distilleries, owners of racehorses, motorsports race tracks, and producers of wind energy.
The Joint Committee on Taxation, a congressional number-crunching service, estimates that the temporary and extended tax breaks included in the budget bills will cost about $54 billion over 10 years.
An additional corporate welfare section was added in the middle of the night. These spending bills are now 2,366 pages. https://t.co/akvC6c5eJm
— Justin Amash (@justinamash) December 17, 2019
On their own, many of the small tax breaks included in the budget bills might be defensible. Distilleries, for example, faced the prospect of a 400 percent increase in federal alcohol excise taxes on January 1, according to the Distilled Spirits Council, which praised the one-year extension of a reduction in that tax.
But even when the policy is sound, the process is a total mess. If Congress believes there is a good reason to continue giving specific tax breaks to distilleries or the horse-racing industry, then it should act to make those tax breaks permanent. And it should do so as part of a deliberative process that determines budgetary priorities, rather than tacking a temporary extension onto a must-pass budget bill.
Indeed, one of the arguments Republicans used to justify cutting the corporate income tax from 35 percent to 21 percent in 2017 was that it would eliminate the need for so many industry-specific tax breaks. Good tax policy would be a lower rate and fewer carve-outs.
Retroactive tax breaks—like the one for bio-diesel, a top priority for lawmakers from Midwestern states particularly—make even less sense. Why should the government incentivize decisions that those businesses made years ago? That's just a last-second giveaway to politically connected businesses who hired good lobbyists.
Even without the temporary tax credit extensions, the budget bills are a fiscal disaster. All told, they will add an estimated $500 billion to the national debt over the next decade. Most of that total comes from the repeal of three taxes that were originally part of the Affordable Care Act, including a tax on medical devices and another tax on high-end health insurance policies.
Good budgeting requires setting priorities based on the fact that the federal government collects a finite amount of revenue each year. Collecting less tax revenue requires spending less money; spending more money requires increased taxes. Congress has proven, once again, that it is unable or unwilling to understand that.