It has become clear that the proposed tax legislation includes some offensive perks that are there to accommodate special interests. For example the legislation would provide $5 billion in subsidies for corn-based ethanol and a tariff to protect against ethanol imports. In addition, there are tax breaks for commuters who use mass transit and provisions aimed at increasing production of hybrid automobiles, biodiesel fuel, coal and energy-efficient household appliances.
But how many of these porky provisions have been included, and what is the combined price tag? Also, are these new perks or extensions of already existing ones?
I haven’t seen an answer to the first questions. As to the second, it appears that the tax deal legislation contains no new special perks. The Washington Post reports that the only new tax breaks are the reduction in the payroll tax and a provision allowing businesses to write off 100 percent of the cost of capital investments next year. Most Republicans favor these methods of promoting growth. According to the Post, “the bill does not contain a single perk requested by a lawmaker, perhaps a first for major tax legislation.”
Moreover, again according to the Post, more than 40 existing tax breaks that have been around for years have not been included in the new legislation. And most of the breaks that would be retained are likely to be killed next year by the new Congress.
Thus, to the extent one characterizes these breaks as “stimulus,” they are a continuation of longstanding stimulus, not new stimulus like that adopted in the $800 billion plus package of 2009.
Ideally, the tax deal legislation would end all existing tax perks. But the question is whether the legislation’s failure to accomplish that feat this year offsets the benefits of extending the Bush tax cuts for two years, taking into account as well the other plusses and minuses of the legislation.
Reasonable conservatives can disagree about the correct answer which, for some, may depend on how much pork has been retained. But this, I think, is how the question should be framed.
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