Even as Washington says it wants to eliminate the credits and loopholes in the tax code, the “fiscal cliff” deal Congress agreed to this week is littered with dozens of them.
Tax deductions for college tuition and teachers’ classroom supplies, tax credits for adoptions, and special breaks for businesses that train rescue crews to respond to mine cave-ins are only a few of the giveaways that were criticized by both sides going into negotiations.
Even as he called on Congress to go after “loopholes and deductions that aren’t available to most,” President Obama on Monday touted some tax breaks he fought to keep in the agreement.
“It would extend our tuition tax credit that’s helped millions of families pay for college,” he said. “It would extend tax credits for clean-energy companies that are creating jobs and reducing our dependence on foreign oil.”
It’s not just the president. Republicans also clamor for preferred breaks. The year-end debate has become so routine that it comes with a label: the tax-extenders package.
Special tax breaks have been prime targets in deficit talks for the past three years. Critics say elimination is the fairest way to broaden the tax base.
In 2010, the Bowles-Simpson deficit commission recommended culling many of the deductions and tax breaks and using the revenue to reduce the deficit and bring down marginal tax rates.
During the presidential campaign last year, Republican nominee Mitt Romney based his economic plan on a broad but vague pledge to cut many of the loopholes and use that money to lower tax rates across the board. Mr. Obama campaigned on ending the loopholes and using that money to reduce the deficit.
This week’s agreement, however, deepens the deficit and extends tens of billions of dollars worth of deductions and tax credits that have deep support on both sides of the aisle, making them difficult to cull.
Among the breaks in the deal are several tax cuts to boost biofuels and other renewable energy, at a cost of more than $18 billion over the next decade; tax credits for adoption, valued at $759 million; a $10,000 tax credit for training mine rescue teams, expected to cost the government $5 million; and a credit for businesses to offset the salaries they pay to members of the military reserves who are called up for active duty.