Monday, November 3, 2014
TO EXTEND, OR NOT TO EXTEND. THAT IS THE QUESTION
I found much to agree with in Diana Furchtgott-Roth’s editorial at the Manhattan Institute’s E21 blog “No Band-Aids, Let's Have Real Tax Reform”.
The premise of the editorial is –
“Congress should not pass such a tax extenders bill. Rather, the new 114th Congress should take a careful look at the U.S. tax system and propose permanent reforms. Instead of hurtling from one temporary tax provision to another, people and companies need certainty that comes with stable provisions, not just an extension of expired provisions that will then expire again in a year or two, requiring yet another set of tax extenders.”
Diana gives “five reasons not to pass a tax extenders bill”. Among them (highlights are mine) –
“Tax extenders would remove the incentive for tax reform. Everyone knows that the United States needs tax reform. . . . A failure to pass the tax extenders would put more pressure on Congress to move forward with tax reform.”
“Tax extenders corrupt the system. Members have an incentive to pass tax extenders rather than permanent reform because it helps them raise campaign donations from businesses and sectors who benefit from the extenders. It is unfortunate that we have the best government that money can buy.”
I obviously agree that “the United States needs tax reform” – truly substantive reform, not just token measures.
I agree that passing temporary tax benefits that are extended every, or every other, year at the last minute is bad tax policy. If a tax benefit is appropriate it should be permanent – except in response to serious natural disasters, the idiots in Congress should never enact temporary tax measures.
I certainly agree that the idiots in Congress are motivated more by payments (in dollars and votes) from lobbyists and special interest groups than a desire to what is best for the country.
And I agree that many of the extenders should not be extended.
I am, however, fond of the option to deduct state and local sales tax instead of state and local income tax. It is a good option for residents of states without an income tax, and I find it helpful for many of my retired clients who itemize and pay only minimal state income tax.