Paying for Tax “Extenders” Would Help Restrain Debt

December 9, 2013 at 3:11 pm

“Lawmakers from both sides of the aisle are starting to ramp up their efforts to renew targeted tax breaks set to expire at the end of the year,” The Hill notes.  Our new report explains that, simply by paying for any renewal of these and other tax “extenders,” policymakers could shrink by one-third the projected increase in the debt as a share of the economy over the next several decades.  Here’s the opening:

Several dozen temporary tax-expenditure provisions, collectively known as “tax extenders” because Congress routinely extends them, are set to expire again at year’s end.  More such provisions expire at the end of 2014.  Given the importance of addressing mid-term and long-term deficits, policymakers should make a firm commitment to pay for any extension of these provisions.

Policymakers are negotiating a package to ease the sequestration budget cuts over the next couple of years and to pay for the cost of doing so.  In coming weeks, policymakers also will seek to extend relief from the scheduled deep cuts in Medicare payments to physicians, and — as they have done in each of the past few years — they will offset that cost as well.  The tax extenders should be no different.

Paying for those “extenders” that Congress continues would have a significant impact on long-term deficits.  The publicly held debt amounted to 75 percent of GDP (gross domestic product) in 2013, and we project that it will climb under current policies to 99 percent of GDP in 2040.   (This estimate assumes the extenders are continued but not paid for.)  If policymakers offset the roughly $50 billion-a-year cost of continuing the extenders, the debt-to-GDP ratio will rise about 8 percentage points less, reaching 91 percent in 2040.  An eight-percentage-point improvement would eliminate about one-third of the projected rise in the debt ratio by 2040 under current policies, far from sufficient to address long-term deficits and moderate the debt ratio but an important step toward accomplishing that.

Click here for the full report.

Print Friendly

Your Comment

Comment Policy:

Thank you for joining the conversation about important policy issues. Comments are limited to 1,500 characters and are subject to approval and moderation. We reserve the right to remove comments that:

  • are injurious, defamatory, profane, off-topic or inappropriate;
  • contain personal attacks or racist, sexist, homophobic, or other slurs;
  • solicit and/or advertise for personal blogs and websites or to sell products or services;
  • may infringe the copyright or intellectual property rights of others or other applicable laws or regulations; or
  • are otherwise inconsistent with the goals of this blog.

Posted comments do not necessarily represent the views of the CBPP and do not constitute official endorsement by CBPP. Please note that comments will be approved during the Center's business hours. If you have questions, please contact communications@cbpp.org.



 characters available