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THE MUSINGS OF A TRADITIONAL SOUTHERN DEMOCRAT

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Saturday, January 05, 2013

Industry Tax Breaks Survive in Deal - Those industry-specific tax breaks have drawn the ire of government watchdog groups. "These were intended to be temporary. Now, they get renewed mostly without discussion."

From The Wall Street Journal:

The package that Congress approved this week to avert the fiscal cliff has drawn new attention to a set of tax breaks approved for individual industries such as racetrack owners and makers of electric motorcycles.

The 11th-hour deal included the renewal of more than 50 expiring tax breaks for businesses and individuals that will cost the U.S. Treasury roughly $71 billion over the next decade.

The package of breaks, which was originally approved last summer by members of the Senate Finance Committee in a broadly bipartisan vote, includes a number of popular tax breaks, such as one allowing individuals to make deductions for state and local sales taxes, and one to help teachers who spend their own money on classroom supplies.

The legislation also included more narrowly targeted provisions, such as the tax credit for buying the motorcycles and the relatively new tax credit for biofuels derived from algae. The bill also gives tax rebates to Puerto Rico and the U.S. Virgin Islands for rum that is taxed when it is imported into the U.S.

Those industry-specific tax breaks have drawn the ire of government watchdog groups. "These were intended to be temporary. Now, they get renewed mostly without discussion," said Tom Schatz, president of Citizens Against Government Waste.

Every year, Congress renews a series of tax breaks for individuals and specific industries, making temporary features of the tax code into a seemingly permanent fixture. Known as "tax extenders,'' they started more than a decade ago. But the package grew as part of a 2004 jobs act during the George W. Bush administration and has since swollen.

The breaks are often slapped on a must-pass bill at the end of the year, before Congress wraps up its work. In 2008, Congress attached the tax breaks to legislation establishing the Troubled Asset Relief Program.

The tax breaks were added to the fiscal-cliff deal during talks between the White House and aides to Senate Minority Leader Mitch McConnell (R., Ky.). Initially, the White House asked for a permanent extension of these breaks, before accepting a two-year extension, some of it applied retroactively, in the face of resistance from the Senate GOP.

Lawmakers in both parties expected the Senate Finance measure to be included on one of the last bills to be approved before Congress was to adjourn. "It was an accepted assumption—and there was never any pushback—that the traditional extenders package was going to be included in a year-end deal," an administration official said.

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