What do college students, renewable energy companies, and rum importers have in common? They're all about to see their tax breaks expire. What should be a routine renewal of popular tax breaks has become a fraught waiting game thanks to Congress' manipulation of budget calculations. From the AP:
The two-year extension Congress passed in January cost $76 billion in reduced revenue for the government, according to the nonpartisan Joint Committee on Taxation. Making those tax breaks permanent could add $400 billion or more to the deficit over the next decade.
Instead of permanence, then, Congress has chosen to renew the breaks year by year—but this dyfunctional Congress never quite got around to doing it. That means myriad businesses and individuals will be unable to properly calculate their 2014 taxes until Congress passes a bill that retroactively applies the breaks. And if recent history is any indication, our representatives in Washington are in no rush to do that. Congress didn't renew 2012's tax breaks until Jan. 1, 2013, leaving taxpayers just enough time to claim the breaks on their 2012 returns.
Given all this confusion, why doens't Congress just make the cuts permanent and accept the budget impact all at once? It might go beyond dysfunction and budget manipulation:
"More cynically, some people say, if you just put it in for a year or two, then that keeps the lobbyists having to come back and wine-and-dine the congressmen to get it extended again, and maybe make some campaign contributions," said Mark Luscombe, principal tax analyst for CCH, a consulting firm based in Riverwoods, Ill.
Accountants are advising Americans who rely on the tax breaks to expect for their demise and plan accordingly. That's sound advice, certainly, but not exactly a rosy forecast.