House votes to extend expired tax breaks

The House on Thursday passed two bills to permanently extend tax credits that expired at the end of 2013 despite veto threats from the Obama administration.

The more expensive of the two tax measures the House passed, 272-144, extends a provision known as Section 179 that allows small businesses to write off up to $500,000 worth of investments a year. Section 179 would cost roughly $73 billion over a decade.  

{mosads}The House also passed, 263-155, a pair of incentives, packaged together in one bill, to help a type of small business known as S corporations. S corporations do not pay federal income taxes and instead pass along income to their shareholders, who then report that on their personal tax returns. 

One of the two incentives, which combined cost around $2 billion over a decade, deals with charitable contributions by S corporations. The other would cut taxes for small businesses that were formerly organized as corporations.

Republicans argued that the tax credits should be extended on a permanent basis to provide more certainty for businesses that use the breaks.

“Permanence in the tax law is especially important for these privately held businesses,” said Rep. Dave Reichert (R-Wash.). “Instead of selling assets and using the proceeds to hire new workers or invest in new equipment, these businesses sit on the sidelines.”

Democrats said that they support the tax credit provisions but want them to be offset.

“We’re going to extend this. But we’re not going to make it permanent, unpaid for,” said Rep. Sandy Levin (D-Mich.), the top Democrat on the House Ways and Means Committee. 

Fifty-three Democrats voted for the Section 179 tax credit bill and 42 for the S corporations measure, despite opposition from their leadership.

The White House, which issued veto threats against both tax credit bills, and congressional Democrats say the GOP’s push to restore the tax breaks for the long term without offsets is fiscally reckless and hypocritical. Democrats argued that Republicans have demanded offsets for unemployment insurance but not tax breaks.

“The Republican majority insists that an extension of unemployment insurance must be paid for. But when it comes to tax cuts, they can simply be added to the deficit,” Levin said.

The Senate Finance Committee has approved a measure that would extend the three incentives, and dozens more, for two years at a cost of more than $80 billion with no offset.

House Ways and Means Committee Chairman Dave Camp (R-Mich.) pointed out that the package crafted by Senate Democrats wasn’t paid for either.

“Yes, there is a Senate bill. It is a bipartisan bill that extends many tax policies. And guess what? It’s not offset. Because it’s never been offset,” Camp said.

Last month, the House passed a permanent extension of the research and development tax credit that would cost $156 billion over 10 years with no offset. Sixty-two Democrats joined all but one Republican to pass the measure.

Camp, who will retire at the end of the year, is pushing the permanent extensions as a way to spur momentum for tax reform.

But the Senate extenders package is currently bogged down amid a broader dispute between Democrats and Republicans over floor procedure. Most tax observers believe a final deal on the expired provisions won’t be struck until after November’s elections.