This week, a House Ways and Means (tax writing) subcommittee held a hearing on so-called tax extenders. At Taxpayers for Common Sense, we’ve been watching and cataloging these narrowly targeted, special interest tax provisions that get reupped for a year or two at a time. Naturally, we were happy to share our thoughts at the hearing by testifying.

So, what is wrong with tax extenders? For starters, they undercut the most widely accepted goals of tax policy, which is to provide certainty, a predictable revenue flow, and to encourage future behavior. The process is just as bad. Hodge-podge packages of unrelated extenders are attached to a must-pass bill – without full offsets for lost revenue. Think 2008 Bank Bailout, 2012 Fiscal Cliff Deal, and 2014 CROmnibus. Plus extenders add to the complexity of the tax code. All of which results in Washington picking winner and losers based on political influence. Oh and wait – sometimes extenders look backwards. In the last decade, six out of seven extender bills have been at least partially retroactive, subsidizing past – not encouraging future – actions.

Wasn’t the big tax package that passed in December supposed to solve all these problems?  Apparently not. Because on the very same day the most sweeping tax package in a generation passed the Senate in December, Finance Committee Chairman Hatch introduced the Tax Extenders Act of 2017, extending tax breaks that had expired at the end of 2016 and through 2018. That’s the opposite of tax reform, and most of the tax breaks in that bill had been extended many times before. While Senator Hatch’s bill didn’t pass, most of it was rolled into last month’s Bipartisan Budget Act – except they were only extended through 2017. Like a bad time travel movie those extenders expired before the legislation passed. And given the scope of the massive December tax package, it seems reasonable to conclude that either breaks left out were unimportant or lawmakers couldn’t figure out how to shoehorn the costs into the $1.5 trillion deficit 

The December tax bill actually made the problem of tax extenders worse, not better. It set the stage for a whole new round of tax extenders by including many provisions that expire, like the new break for craft beer, which expires in 2019.

Not only are tax extenders a terrible way to make tax policy, they have also produced some almost absurdly suspect expired provisions.

One extender provides three-year depreciation of certain race horses and has been renewed four times. Really? Other than political influence, how did this became a tax policy priority? When did race horse investors’ profits become critical to the country’s economic health?

Another extender provides for a seven-year recovery period for motorsports entertainment complexes (aka NASCAR tracks) and has been extended six times since establishment in 2004, at a cost of more than $300 million. The NASCAR tax break is a perfect example of a special interest lobbying successfully for special treatment. Demonstrating that each section of the code has a champion, Congressman Reed from Watkins Glen International Speedway came to the hearing just to defend the provision. He represents NY-23, and pointed out that the Speedway in his district is a critical economic driver for the region.  That may well be true, but tax policy should not be designed to meet the needs of individual districts.

More than half the provisions “extended” in the recent budget deal relate to the energy industry – many of which were created to provide incentives to less established sectors as a counterweight to longstanding tax preferences for mature industries. But, the December tax package left legacy energy expenditures in place, thereby renewing demand for extenders from emerging industries. So continues the cycle of adding rather than subtracting subsidies.

Don’t get us wrong, year in and year out, these provisions got extended without oversight. So we appreciate that Congress held a hearing on specific tax extenders. But we also believe the entire process should stop. Thankfully, there appeared to be skepticism from some of the subcommittee members on both sides of the aisle, including both the Chairman and the senior Democrat. In the last decade, short term extensions have added hundreds of billions of dollars to the deficit. We couldn’t afford it then, and with a $20.7 trillion debt, we sure can’t afford it now. Gotta start somewhere.