Tax breaks worth billions set to expire unless Congress acts

Time is running out for Congress to extend more than 50 tax breaks worth nearly $85 billion, including popular ones for college expenses and energy-efficient appliances.

Democrats and Republicans have shown a willingness to extend the tax breaks -- including some that expired in 2013. But the midterm elections largely have brought to a standstill votes on such major issues as taxes and immigration and even military action against the Islamic State.

Among the expiring breaks is a benefit enjoyed in the seven states that do not have an income tax. Taxpayers in those states have been allowed by Congress for years to deduct state and local sales tax instead. According to the Dallas Morning News, more than 2 million filers in Texas -- one such state with no income tax -- used the deduction in 2012, for an average benefit of $1,906.

But if Congress doesn't extend it, the deduction goes away.

This spring, the Senate Finance Committee passed a bill to extend through 2015 nine tax credits, deductions or exemptions that expired in 2013 -- and 26 more that will expire at the end of year.

The legislation has widespread bipartisan support, but Republicans kept it from getting a final vote when denied the opportunity to have their amendments considered.

“I support the tax extenders legislation. I want to see it passed,” Utah Sen. Orrin Hatch, the top Republican on the finance committee, said afterward. “I don’t want to speak for anyone else, but I suspect that the majority of Senate Republicans feel the same way.”

It remains to be seen whether lawmakers would be more amenable to extending at least some of the breaks after the election, and before a new Congress is sworn in. A Senate staffer told on Monday the fate of the bill during the lame-duck session rests on the shoulders of Senate Majority Leader Harry Reid, D-Nev.

In the Republican-controlled House, the Ways and Means Committee has voted in favor of extending 14 of the 50-plus tax breaks, making 12 of them permanent.

But nothing appears headed for a full floor vote yet, in large part because the so-called “breaks” result in less revenue for the Treasury Department and an increase to the deficit -- like the projected $84.1 billion the Senate bill would add if passed in full.

A House staffer said Monday a vote that in effect increases the deficit would be especially difficult in that chamber because every member is up for re-election, and especially hard for Republicans running as hardline fiscal conservatives.

The chamber’s Joint Committee on Taxation has identified 79 expired or expiring federal tax provisions from 2013 to 2023.

Beyond the ones for college tuition and energy efficiency, the list includes the popular deductions for expenses for school teachers, mass transit, mortgage-insurance premiums and for the use of alternative fuels and the vehicles that run on them.

Congress has talked for years about comprehensive tax reform, essentially by implementing a major overhaul to simplify the U.S. tax code. But such a task is complicated and politically perilous.

In March, House Ways and Means Chairman Dave Camp, R-Mich., produced a sweeping tax-reform plan that would create just two tax brackets and lower the corporate tax rate by 25 percent without increasing the deficit, a plan lawmakers call “revenue neutral.”

However, the plan went nowhere with Republican leaders in part because it covered the lost tax revenue by capping or eliminating tax credits and deductions.

House Speaker John Boehner, when asked about the details of the Camp plan at the time, responded in part by saying “blah, blah, blah.”

Still, supporters of tax reform hope the desire to make changes is being stoked by the recent debate over U.S. corporations establishing overseas headquarters to avoid taxes. The Treasury Department imposed new regulations earlier this month to make it harder for corporations to pull off the so-called “inversions.”