House Republicans Vote To Reverse Billions In Deficit Savings
On Wednesday, the House — by a vote of 230-188 — passed one of the six “tax extenders” bills recently approved by the Ways and Means Committee.
The measure, which accounts specifically for research and experimentation tax credit, could have served as a rare example of bipartisanship: both Republicans and Democrats support the broad ideas of an extension and expansion of the research and experimentation credit. But the bill’s actual provisions — or lack thereof — are the source of Democrats’ and President Obama’s opposition to the bill.
As a Center on Budget and Policy Priorities report explains, the GOP-backed bill permanently extends the research and experimentation tax credit, but does offset its cost by closing any loopholes within the current tax code. Thus, the extension and expansion of the credit greatly add to the deficit.
Closing tax loopholes, however, could offset the costs of the six tax extenders: $151 billion for research and experimentation credit; $301 billion for all six Ways and Means bills; and $560 billion for a permanent extension of all tax credits. Not offsetting the costs of extensions means that ultimately 75 percent of the $770 billion in revenue raised by the 2012 “fiscal cliff” deal would be reversed.
Additionally, CBPP points out that the bill “violates budget enforcement rules,” like the 2013 Murray-Ryan resolution that requires lawmakers to “pay for any tax extenders that they continue or for any new tax cuts.” Adding to deficits is a clear contradiction of this provision and would hinder the resolution’s more specific measures that aim to balance the budget by 2024.
The White House has criticized the flawed bill, with the Office of Management and Budget reiterating that the president supports a permanent research and experimentation credit extension, but only if it follows or is joined by an elimination of sevearl loopholes found in the tax code.
“Making traditional tax extenders permanent without offset represents the wrong approach,” the Office of Management and Budget said in a statement.
The White House further threatened that President Obama would veto the bill in its current form — not that the bill is expected to pass the Senate.
Democrats are standing behind the president, calling out Republicans for their hypocritical position on deficits when it benefits their political agenda.
“This takes no courage to put on the floor or to vote for. None. Zip. Tax cuts are easy to vote for. Paying for what you buy is difficult to vote for,” said House Minority Whip Steny Hoyer (D-MD). “And all the wringing of hands and gnashing of teeth with reference to the deficit seems to go by the boards when the Republicans talk of tax cuts.”
The CBPP notes Democrats’ concerns in its report, saying that the tax extenders would “constitute a fiscal double standard” by contrasting “sharply with congressional demands to pay for other budget priorities.” Also, the research and development tax credit — claimed by some of the nation’s largest businesses and corporations — represents budget priorities that are “cherry picked” in ways that mirror heavy lobbying efforts. This explains why other budget priorities and credits — like emergency federal unemployment insurance, or the Child Tax Credit, both which benefit low-income families instead of big corporations — are either completely rejected, or put on the back burner by the GOP.
Those other budget priorities are often met with the typical Republican Party talking points. This usually means that any measure somehow related to the economy and government spending is met with a firm “no” from conservatives who say the measures add to the deficit, and criticize Democrats for seemingly ignoring deficit savings. In fact, the fear of increasing the deficit has served as the GOP’s argument against extending emergency federal unemployment insurance in recent months, as many on the right accuse Democrats of not providing a deficit-friendly way to pay for the benefits’ costs.
Still, Republicans argue that the legislation, as passed on Wednesday, offers domestic businesses and corporations an advantage over foreign competition, which overrides their concern for deficit reduction.
“It is allowing businesses who invest to keep more of that investment, to plow it back into research,” argues House Majority Leader Eric Cantor (R-VA).
The White House acknowledges the tax credit bills could “strengthen the economy and help middle-class families,” but still insists on a more fiscally responsible measure.
Photo: Gage Skidmore via Flickr
Chart via Center on Budget and Policy Priorities
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