POLITICS
05/29/2014 05:03 pm ET Updated May 30, 2014

House GOP Backs Tax Breaks That Add $300 Billion To Deficit

WASHINGTON -- The House Ways and Means Committee pushed ahead a set of tax breaks Thursday that would add another $304 billion to the deficit over 10 years, on top of $310 billion in loopholes it voted for last month.

If all the measures were to become law, they would wipe out the deficit savings Congress passed less than two years ago in the deal that headed off the so-called fiscal cliff. In that deal, Bush-era tax cuts were allowed to expire only on income above $400,000, returning about $600 billion to the treasury over 10 years.

Many of the loopholes that the tax-writing committee voted to extend Thursday are popular, including breaks for charitable deductions. The biggest change made permanent one of the tax cuts used recently for economic stimulus, called bonus depreciation, which allows companies that would normally have to write off new capital investments over many years to get 50 percent of the break right away.

Bonus depreciation has been used in the last two recessions to convince companies to speed up investments to spur the economy. But making the cut permanent -- as well as including things like the planting of fruit vines and trees as eligible investments -- would add $287 billion to the deficit over a decade, according to the Joint Committee on Taxation.

The previous temporary cuts had bipartisan support, but Democrats objected to the new round, arguing that making them permanent would just reward companies for making investments they would have made anyway, and spur little growth. They pointed to a Congressional Research Service report that noted bonus depreciation is a "relatively ineffective tool for stimulating the economy."

"Like the ancient alchemists who thought they could change straw into gold, this bill won't stimulate our economy," said Rep. Lloyd Doggett (D-Texas).

Still, Rep. Dave Camp (R-Mich.), the chairman of the Ways and Means Committee, argued that the temporary breaks counted as "current law," and current law regarding tax breaks should always be extended, without finding offsets in the budget elsewhere to cover the costs.

Other Republicans argued they needed to provide businesses with certainty about tax law. "By making this provision permanent, businesses will have the certainty -- underlining, bold, the certainty -- needed to increase domestic investment, raise wages, and hire more people," said Rep. Pat Tiberi (R-Ohio).

But Democrats were perplexed. Earlier this year, Camp's committee produced a working document aimed at reforming the tax system that reviewed many of the breaks passed by the committee last month and on Thursday. The document, they noted, found a way to preserve the breaks without raising the deficit.

"Since I'm confident that the chair was trying to reduce the deficit in his courageous attempt to reform the tax code, is it not true that in the draft, most of these extensions were either repealed or they were paid for and did not increase the deficit?" Rep, Charlie Rangel (D-N.Y.) asked the committee staffer who was explaining the legislation, Tom Barthold.

"As a general matter, the chairman did lay out as a goal that he would produce a revenue-neutral package," Barthold said.

Given that, Rangel wondered what economic justification there might be for reversing course, and allowing the cuts to simply be tacked onto America's debt.

"My opinions on policy matters don't count. You're all elected representatives," Barthold noted.

"I understand that, Mr. Barthold," Rangel answered, setting up a jibe at Camp. "I'm sorry to put you in that spot. It's embarrassing for us as well."

Democrats argued that the GOP's backing of $614 billion in deficit spending wasn't the only irony on display in the session. While Republicans have insisted repeatedly in recent years that any spending on individuals -- be it on food, unemployment benefits or disaster relief -- be paid for by cuts elsewhere, they hold their favored tax breaks to no such standard.

"As far as things being paid for, if there wasn't a concern for 30 some years for this to be paid for, why all of a sudden now is this [a] great thing that you've got to pay for this stuff?" said Rep. Mike Kelly (R-Pa.). Kelly argued for a bill that would give tax filers more time to claim charitable deductions, which would add $2.9 billion to the deficit.

Camp contended that making the breaks permanent without paying for them was just a matter of being upfront with America, since many of them, especially bonus depreciation, have not been paid for in the past. He also noted that the Senate is considering another temporary, two-year extension.

"Look, if we're not going to pay for things on an ongoing temporary basis every two years, which we haven't done in the three or four times this has been extended, I think we should just be honest about it and call it what it is," Camp said. "We're going to extend this."

Democrats pointed out that the breaks voted on Thursday applied only to a relatively small portion of taxpayers -- the third or so who itemize deductions and are largely more well off. At the same time, they noted, the GOP did not seem interested in considering cuts that benefitted broad swathes of the middle class.

"The majority is once again leaving to an increasingly uncertain fate provisions" like the child tax credit, the earned income tax credit and other items Democrats favor, said Rep. Sandy Levin (D-Mich.), the top Democrat on the committee.

"And that is not to mention their complete inaction on federal unemployment insurance, which has now been cut off to nearly 3 million Americans who are desperately searching for work," said Levin. "The cost of extending bonus depreciation could pay for a full year of extension of unemployment benefits 10 times over."

Michael McAuliff covers Congress and politics for The Huffington Post. Talk to him on Facebook.

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