The Senate couldn't go home for Christmas before handing out one last gift to big business and lobbyists.
In the final hours of the 113th Congress, the Senate passed $42 billion worth of tax giveaways on a 76-16 vote late Tuesday night, sending the House-passed bill to President Obama's desk. He's expected to sign it shortly.
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The bill extends a hodgepodge of 55 tax breaks that overwhelmingly benefit large corporations, lobbyists and special interests, though there are a few provisions that affect individuals as well. Though it technically only lasts for two weeks, through the end of the calendar year, the legislation will allow those affected to claim the credits when they file their 2014 taxes.
The bulk of the bill—which isn't paid for—will benefit major corporations and special interests, whose intense lobbying has turned the whole basket of giveaways into must-pass legislation year after year.
No one believes this is a good way to make policy. Even those who benefit from the tax breaks are frustrated with the stop-and-go approach; many of the tax provisions already expired and are only being restored retroactively. But the approach allows Congress to avoid the difficult choices that would be involved in making them permanent.
The tax breaks include big-business giveaways like the $7.6 billion research and development credit and more controversial provisions like the $6.7 billion renewable energy production credit—a priority for Democrats, environmentalists and industry. Businesses will also benefit from a $1.5 billion tax break that allows them to write off capital investment more quickly and a $5.1 billion giveaway that allows financial firms and manufacturers to defer taxes on certain kinds of income earned overseas.
The bill is also chock full of special-interest giveaways to NASCAR racetrack owners, Puerto Rican rum distillers and Hollywood studios. There are a few provisions that benefit ordinary Americans, including a $3.1 billion tax exemption for mortgage debt that has been forgiven and a deduction for teachers who buy supplies for their classrooms. But one of the few tax breaks to get dropped from the bill was a health care tax credit for certain workers who lost their jobs because of competition from foreign competition and retirees whose former employees terminated their pension plans, as Sen. Ron Wyden, Democrat of Oregon, pointed out shortly before the vote.
The passage of the bill came on the heels of another handout to big business: the rollback of new regulations on derivatives trading in the 2015 spending bill that Congress voted through last week.
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Slamming the bill's "unjustifiable tax giveaways," Sen. Sheldon Whitehouse argued that the tax breaks would do little to incentivize new economic activity—one rationale for passing them—because most of them would be applied retroactively and wouldn't extend to 2015. "If tax policy is intended to influence behavior, the extenders bill is a double failure: it spends money rewarding things that have already happened and offers no incentives for businesses and individuals for the year ahead," the Rhode Island Democrat said on the Senate floor.
Wyden, chair of the Senate Finance Committee, also voted against the bill, having tried and failed to convince lawmakers to move toward comprehensive, long-term tax reform. "This tax bill doesn’t have the shelf life of a carton of eggs," Wyden said, adding later: "It’s important to recognize that this extender debate proves once again that the tax code is utterly broken."
House Republicans tried to pass alternative legislation that would have made a few of the tax credits permanent, but Democrats shot down that approach for predominantly benefiting corporations. So both parties agreed resorted to a short-term bill that predominantly benefits big businesses instead.