Kent Conrad: Congress should pay for any extension of tax breaks
Kent Conrad, former Chairman of the Senate Budget Committee, wrote a commentary in The Hill. It is reposted here.
Just under three years ago – in my waning days serving this country in the Senate – Congress and the president enacted an important down payment to fixing our debt by asking the top 1 percent of earners to contribute an additional $600 billion to deficit reduction over a decade. Just three years later, Washington is working toward a bipartisan agreement to give all that revenue away and accelerate the explosion of our national debt.
According to press reports, lawmakers are currently negotiating a package to restore many of the so-called tax extenders which expired last year. Extending these 50-some tax breaks for businesses and individuals for just two years would cost nearly $100 billion – but negotiators want to go way further than that; they are eying a $700 billion package.
Many Republicans want to make permanent and even expand many of these tax breaks, particularly those for businesses. Democrats, meanwhile, want to extend and possibly expand several financial crisis-era low-income tax breaks scheduled to expire in 2017. The compromise, sadly, is to do both – and add the entire cost to the nation’s debt.
With interest, the emerging tax deal could add nearly $850 billion to the debt this decade and $2.3 trillion by 2035. That’s well on the way to giving away all the revenue we’ll raise over the next ten years from the higher taxes on upper-income earners that we passed just three years ago, or most of what we are supposed to save from the so-called sequester.
Assuming a deal like this passes, the national debt would rise from near its current non-war record of 74 percent of the economy today to 80 percent by 2025 – half of that growth due to this package – and about 100 percent by 2035; that’s just not sustainable. It’s also hypocritical, given that Congress’s own budget resolution calls for balancing the budget by 2025, not ballooning it.
Budgeting is about trade-offs, not horse-trading. And if these business and individual tax breaks are really worth extending, they should also be worth paying for.
The best option would be to address the tax extenders within the context of tax reform where tradeoffs can be considered. Former Republican Rep. Dave Camp (Mich.), who chaired the Ways & Means Committee as recently as last year, put forward a thoughtful tax reform plan that would permanently address many of the extenders without adding to the debt. The Simpson-Bowles fiscal commission, on which I served, had a deficit reduction plan that did the same.
All of these plans would trim the more than $1.3 trillion of annual tax breaks in current law in order to simplify the tax code, lower rates, promote economic growth, and pay for any new or restored tax breaks – and the latter two plans also generated revenue for deficit reduction.
As someone who served on the Senate Finance Committee, I know that every one of those tax breaks has a constituency that strongly defends it. I have also supported some of these tax breaks in the past and understand the importance of tax credits for low-income families. But expanding or making these tax extenders permanent without covering the costs locks in special interest tax breaks and higher debt and moves in the opposite direction of tax reform.
Sadly the emerging deal won’t simplify the tax code, promote growth, or reduce the deficit – it will expand tax breaks, add to the debt, and thus slow economic growth.
Given that we are already on track to add more than $7 trillion to the debt over the next decade, we can’t afford to keep piling up more debt and placing a crushing burden on future generations.
Rather than undoing the progress we’ve made over the last few years, we need to build on it. To start with, lawmakers should stand up for fiscal responsibility and fully offset the cost of any extension of tax breaks.
"My Views" are works published by members of the Committee for a Responsible Federal Budget, but they do not necessarily reflect the views of all members of the committee.