Tax Extenders Bill Still Contains Irresponsible Spending Increases and Dangerous Tax Hikes

Curtis Dubay /

Congressional leaders have responded to the backlash against the original $174 billion cost of the “tax extenders” bill by reducing its cost by $47 billion. Even with the reduction, the bill will still add $84 billion to the deficit over the next decade. They have reduced the amount of spending in the most cynical fashion possible – by cutting the number of years over which the spending would occur. Of course, they have every intention of extending the spending again when the current extensions expire.

The irresponsible overspending in the tax extenders bill is not the only fatal flaw of the legislation. The $43 billion of tax increases included in the bill to offset part of its cost will slow the recovery of the fragile economy. Even worse, Congress is once again in such a rush to pass a bill it isn’t bothering to figure out the broader impact these tax hikes, especially those affecting U.S. businesses operating abroad, could have on the economy and the competitiveness of United States businesses that operate internationally.

Of greatest concern in this regard are the proposed reductions of the foreign tax credit that would severely curtail the ability of United States businesses that operate internationally to avoid double taxation and will drive countless more jobs – and even corporate headquarters — overseas. That’s for sure. But what isn’t certain is how much damage would be done.  The troubling changes to the foreign tax credit came out of the clear blue sky. No one, including Congress and the businesses that would be affected, has had time to get a handle on how the provisions would operate or the broader impact they will have on the United States’ international competitiveness. (more…)