The top lawmakers on the House Ways and Means Committee disagreed over whether extending tax breaks for research and international finance operations should be offset to prevent the U.S. budget deficit from growing.
Representative Dave Camp, the committee chairman, has suggested making some lapsed tax breaks permanent and letting others expire. Congress has routinely extended many of the breaks without pairing them with spending cuts or tax increases, he said yesterday.
“If we're going to continue doing that repeatedly,” the Michigan Republican said at a hearing, “it's worth at least having this discussion.”
More than 50 tax breaks expired Dec. 31, including the research and development tax credit used by companies such as Intel Corp. and the ability to defer global financing income, which benefits General Electric Co. and Caterpillar Inc.
As prospects for broader tax-code changes continue to dim, the expired breaks probably will be the main legislative action on tax policy this year.
Camp said today that he would begin advancing legislation to permanently extend some tax breaks.
“As you get to some of the smaller items, we might do them as groupings, but we're not going to do them all as one fell swoop here,” he told reporters.
The Senate Finance Committee voted April 3 to extend almost all of the breaks through 2015 without covering the cost of more than $85 billion in forgone revenue.
Camp's approach differs from the way he handled the expired breaks in the draft revamp of the U.S. tax code he released in February. In that proposal, he started with the assumption that the tax cuts remained expired, which meant that he included enough revenue-raising provisions to pay for continuing the breaks.
Camp, who announced last week that he won't seek re-election, also asked for comments on whether that was the right approach.
Representative Sander Levin of Michigan, the top Democrat on the Ways and Means panel, said Camp was ignoring some expired provisions, such as the New Markets Tax Credit that promotes investment in struggling areas.
“Fiscal responsibility cannot simply be a talking point that is set aside when it comes to provide tax incentives for the chosen few,” Levin said.
Many of the lapsed provisions, particularly the research credit, have bipartisan support. The routine lapses in that break and others are inefficient, said James Redpath, a Minnesota accountant testifying at today's hearing.
“It makes businesses do things they otherwise wouldn't do,” he said.
The breaks for U.S.-based multinationals' foreign operations are more controversial. Texas Democrat Lloyd Doggett said they have allowed companies such as GE to reduce their tax rates and remove some income from taxation by any country.
Bloomberg News
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