The House and Senate conferees attempting to arrive at an agreement on payroll taxes, unemployment insurance, and medicare reimbursements. They are not likely to expand the agenda to include the other so-called 'extenders' that were not extended at the 2011 year-end date when they expired. See Pew report Times Up: Federal Provisions Set to Expire in January 2012 (Dec. 9, 2011) (providing a good graphic and information on the cost of extenders). The extenders include:
- the so-called "AMT Patch" that expands the exemption amount so that the AMT does not apply for about 30 million individual taxpayers, at a cost of roughly $70 billion
- employee mass transit subsidy extra amount (it will decline from 230 to 125 a month)
- research & development tax credit (a deduction is always available)
- active financing exception to Subpart F for banks
- exclusion of 100% gain on small business stock under section 1202
- 5-year carryback on certain business credits
- alternative minimum tax rules for general business credits for small businesses
- temporary reduction of recognition period for built-in gains tax for S corporations under section 1374(d)(7)
- increased expensing under section 179
- bonus depreciation under section 168(k)
- increased deduction for startup expenditures under section 195
That's a good thing. Congress could at least take a look at the empirical evidence regarding the effectiveness of the extenders. Have they delivered on what they promised? It is doubtful that they have. For example, the AMT patch does prevent the 'clawback' into the middle-income classes of the AMT. Yet this annual patch is a terrible way for Congress to do business. It would be much better for it to bite the bullet and consider what group of taxpayers should be exempted from the AMT and then make that permanent change, as I've written in my earlier Florida Tax Review piece on the AMT. Most of the rest of the provisions do more harm than good. The active financing exception for banks is a pure subsidy. The R&D credit is essentially a tax giveaway--it has been extended after the fact of the domestic R&D that it is supposed to incentivize, and it merely reduces taxes for companies that will have to undertake research or render themselves irrelevant. They have been extended over and over again, even much after they could possibly incentivize the economic behavior they reward. It's time to be done with them. If the GOP is as concerned about the deficit as it makes itself out to be when it talks about ordinary Americans' earned benefits, then it ought to agree that these 'temporary' extenders should be done away with once and for all.
Howard Gleckman at the Tax Policy Center agrees on this issue.
Most of these special interest baubles are hardly worth keeping. They include a menagerie of alternative energy credits, special depreciation rules (including the ever-popular tax break for NASCAR race tracks), extraordinary deductions for certain charitable gifts, and various investment incentives for developers in tax-favored communities (enterprise zones, Gulf coast opportunity zones and lower Manhattan–a distressed neighborhood if ever there was one). Congress would do the nation and the budget a great favor if it let most of these goodies quietly fade away. Howard Gleckman, Whatever Happened to those Expiring Tax Cuts? Tax Policy Center, Dec. 29, 2011.
Gleckman notes that Congress is enamored of some of these extenders, even where there is no evidence that they accomplish the purpose for which they were enacted.
[The R&D credit] windfall does little to spur R&D in the real world, but has reached near-mythical status among lobbyists and lawmakers. ... But Congress has made a habit of letting these measures expire and then bringing them back to life, no matter how useless they are. Id.