Congress likely to finalize tax credits extension; some call package harmful

WASHINGTON – A hefty lobbying effort on behalf of special interests as varied as renewable energy advocates, corporations and teachers means both chambers of Congress are likely to renew another year's worth of expired tax breaks at an estimated unpaid price tag of $42 billion to taxpayers.

The House handily passed the measure earlier last week with all of Minnesota's members supporting it, save for Democratic Rep. Keith Ellison, who says the package helps corporate America more than it helps the average worker. The proposal heads for a vote in the Senate this week and is expected to pass. Both Democratic Sens. Al Franken and Amy Klobuchar say they will vote yes.

Politicians say the retroactive renewal measure gives end-of-year certainty to small businesses trying to figure out their 2014 tax burden, but some special interests say this lurching, piecemeal approach to overall taxation is ridiculous — even harmful. In fact, the tax credits expire again on Jan. 1, 2015, which means Congress will likely embark on this whole drama again next year.

Take the wind industry, which will enjoy production tax credits for 2014 thanks to the proposal. Minnesota-based Windustry executive director Lisa Daniels says the extender, coming so late in the year, will do no good for her industry's certainty.

"They're giving us about 20 days to do about 20 weeks worth of development work," she said. "It's boom and bust, boom and bust and the bust is like so off-the-charts downward, it's like a cliff."

She said starts on new wind projects have taken a dive — there were virtually no starts in Minnesota in 2014 — because industries were unsure of the value without the tax credit.

The House measure prolonged a credit for research and development, donations for conservation easements and corporate expensing. It includes credits for paid state and local sales taxes, credits for mass-transit users, teachers and help for small businesses.

"Uncertainty is the enemy of growth," Weaver said. "If you can't plan, if you don't know what the rules are, it's hard to invest and grow."

Democratic Rep. Betty McCollum, who represents St. Paul, said the vote was a tough one. She was all set to vote against the extenders — mostly because they weren't paid for and added to the national debt. But she heard from people all week — including White House officials — about how, like a holiday gift, the extenders delivered some economic stability at the end of the year.

"I think families and businesses in the end deserved to know," she said. "We need to do a better job about doing overall tax reform … closing tax loopholes, making it a full-blown discussion and a vote."

There was a greater effort on both sides to embark on tax reform, but it fell apart before Thanksgiving. That's when the White House issued a veto threat to the emerging deal, which had some Democratic support. GOP Rep. Erik Paulsen, who is on the Ways and Means Committee charged with taxation policy, called the one-year version he supported this week "wimpy" and a "joke."

"I'm just frustrated because there was bipartisan — I mean, real bipartisan — work getting done with negotiations and making some of the extensions permanent," he said. "It's unprecedented the White House stepped in. Apparently it's never happened before that the White House stepped in the middle of negotiations and just stopped the issue with a veto threat."

"Congress should pay for this bill," said Maya MacGuineas, president of the Committee for Responsible Federal Budgets. "Congress and the president cannot keep governing on a retroactive basis, waiting until the last minute to make major decisions about the structure of our tax code."

Sen. Al Franken said the package — albeit temporary — was full of "good things."

"We need tax reform. We need comprehensive tax reform so the tax code is simpler, fairer and more efficient for working Minnesotans," he said. "That's going to take some time, so I support this brief extension now."