Tags: tax | extender | Congress | debt

Congress to Increase Taxes With Extenders

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Monday, 08 Dec 2014 08:01 AM Current | Bio | Archive

The House GOP passed the Tax Increase Prevention Act of 2014 and made it retroactive. This Act is a package of temporary tax provisions, commonly referred to as tax extenders, which impact the tax liability of both individuals as well as businesses.

This week the Senate will likely also pass the Act, thus allowing the whole temporary mess of nauseating complex tax code provisions to once again be the proverbial can being kicked down the street.

Although there was much ballyhooing and political posturing about Congress doing comprehensive tax reform, this of course was DOA.

The president for his part said he would veto any comprehensive reform tax bill that didn't provide for more increases in the welfare payments made to people who don't pay tax. Of course, the cash to do this comes from taxes from people who do pay tax or will eventually be stuck paying the increases in the federal debt.

In the meantime, Congress and the president owe a lot of debts to campaign contributors and special interest voting blocks for this past election.

The traditional ways these are repaid are through special provisions in the tax law. But since it wouldn't be political to call them kickbacks, retro-payments or payoffs (which is what they are), Congress refers to them as tax extenders.

But look at what's actually happening here. Each of these provisions does benefit a particular category of recipients who have paid a lot of money to lobbyists to effectively bribe various congresspersons to get their particular piece of federal largesse.

This means that taxpayers not getting some of the gravy are paying or borrowing to pay the people who do get benefits. Those who do get some effectively offset each other.

As a result, the provisions of the tax extenders are nothing more than hard tax increases.

The game played by Congress is quite subtle. The temporary tax extensions will go for one year. Since Congress spends much more money than it takes in, that requires an increase in borrowing.

However, the debt cap will run out in March. It seems to me that in March, Congress, after much further blustering and pretending that they are all serious, will then play the threat-to-shut-the-government-down card.

At that point, for the benefit of the country they will raise the cap on the debt since they have already locked into stone the increases in cash needs of which the tax extenders play their multibillion-dollar bit.

By the time the tax extender's deadline comes around in a year, it will again be time for Congress to pretend they may not extend the tax extenders. This is right at the start of the next election cycle when they start raising money for the 2016 election.

Again, all the special interest groups will crank up their lobbyists, campaign contributions will flow and pledges will be made by special interest voting blocks and in another great show of Congress being all beneficent they will, in a bipartisan effort, vote to continue the temporary tax giveaways.

The reality is that the so-called tax extender provisions serve as the means for Congress and the administration to both raise taxes and campaign contributions by playing each special interest group's sense of entitlement to a tax preference against the other.

One thing the Tax Increase Prevention Act of 2014 doesn't do is prevent an increase in the amount of actual tax on the economy as a whole.

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Kleinfeld
The House GOP passed the Tax Increase Prevention Act of 2014 and made it retroactive. This Act is a package of temporary tax provisions, commonly referred to as tax extenders, which impact the tax liability of both individuals as well as businesses.
tax, extender, Congress, debt
573
2014-01-08
Monday, 08 Dec 2014 08:01 AM
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