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December 31, 2013

Congress letting 55 tax breaks expire at year end

(Continued)

A series of tax breaks promote renewable energy, including a credit for power companies that produce electricity with windmills.

The annual practice of letting these tax breaks expire is a symptom a divided, dysfunctional Congress that struggles to pass routine legislation, said Rep. John Lewis of Georgia, a senior Democrat on the tax-writing House Ways and Means Committee.

“It’s not fair, it’s very hard, it’s very difficult for a business person, a company, to plan, not just for the short term but to do long-term planning,” Lewis said. “It’s shameful.”

With Congress on vacation until January, there is no chance the tax breaks will be renewed before they expire. And there is plenty of precedent for Congress to let them expire for months without addressing them. Most recently, they expired at the end of 2011, and Congress didn’t renew them for the entire year, waiting until New Year’s Day 2013 — just in time for taxpayers to claim them on their 2012 returns.

But Congress only renewed the package though the end of 2013.

Why such a short extension? Washington accounting is partly to blame. The two-year extension Congress passed in January cost $76 billion in reduced revenue for the government, according to the nonpartisan Joint Committee on Taxation. Making those tax breaks permanent could add $400 billion or more to the deficit over the next decade.

With budget deficits already high, many in Congress are reluctant to vote for a bill that would add so much red ink. So, they do it slowly, one or two years at time.

“More cynically, some people say, if you just put it in for a year or two, then that keeps the lobbyists having to come back and wine-and-dine the congressmen to get it extended again, and maybe make some campaign contributions,” said Mark Luscombe, principal tax analyst for CCH, a consulting firm based in Riverwoods, Ill.

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