February 9, 2018

Budget Deal Includes Tax Privileges for Special Interests

Tad DeHaven

Research Analyst

There were two possible reasons why expired tax breaks for politically-privileged industries weren’t included in the 2017 Tax Cuts and Jobs Act: either Republicans had taken a stand against special-interests or they simply planned on including them in “must pass” legislation later.  

It appears to be the latter.

On the same day that the tax overhaul passed, Senate Finance Chairman Orrin Hatch (R-UT) introduced legislation that would resuscitate more than 30 targeted tax privileges, including benefits for rum producers, racetrack operators, and a variety of energy interests. With that, the writing was on the wall that these so-called “tax extenders” – the polite name given to supposedly temporary tax provisions that get renewed every couple of years – would be revived.

Indeed, an article in last week’s Roll Call indicated that the fix was in from the get-go:

[Iowa Senator Charles] Grassley, a senior Finance Republican and the panel’s former chairman, said House Speaker Paul D. Ryan personally assured him that an extenders package would move separately from last year’s historic GOP tax code overhaul, which left out many favored tax breaks. Lapsed provisions such as the biodiesel blenders credit are critical for many of the Iowa senator’s constituents.

“It was decided not to include them, based on the promise to a lot of us … that there’d be an extenders bill and we’d get the extenders bill passed,” Grassley said. “It included a conversation that I had by telephone with Speaker Ryan, because my vote was necessary to get the bill out of Finance Committee, that the House would be acting on an extension bill as well.”

And, sure enough, Republicans promptly added the tax subsidies to the bipartisan budget agreement signed by President Trump this morning. Given that the budget deal is as fiscally irresponsible as legislation in Washington gets, the best that can be said is that the Republicans managed to find the appropriate vehicle for the tax giveaways.

As for President Trump, his signature on this budget agreement delivers a major win for “the swamp” that he so effectively decried on the campaign trail. When the president’s push for tax reform kicked off last fall, my colleague Matthew Mitchell and I wondered aloud if Trump would stand up to the special interests. After all, Trump had called for “getting rid of the loopholes and complexity that primarily benefit the wealthiest Americans and special interests.” The tax overhaul the president signed failed to make the tax code a less complicated mess, but at least if left a lot of loopholes expired. With the loopholes added back in, I can now provide an answer to the question Matt and I asked in September:

No.