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Tax Hikes Go Back to the Future
February 7, 2012
Today, the Senate Finance Committee is marking up their transportation bill with an eye toward adding billions in tax increases to cover the overspending in the bill. More spending, more tax hikes to pay for it. Stop me if you've heard this before. But there are two proposals in particular that gave me a little bit of policy deja vu.
First, the so-called "Chairman's mark" includes a $3 billion retroactive tax increase targeting the "carrying forward" of credits claimed back in 2009. You might remember 2009 as the year before the year before this year. The halcyon days when we passed a "stimulus" bill that was going to help our economy boom by 2012. The optimistic times when we could totally afford a trillion-dollar government-run health care program and our debt was "only" $10-11 trillion (as opposed to $15 trillion and counting today). Some on the Senate Finance Committee apparently would like to relitigate tax policy from that wonderful era in American history and enact a retroactive tax hike.
Now, it should be noted that the two credits they're targeting (the alternative fuel mixture credit and the cellulosic biofuel producer credit) are not ideal tax policies by any stretch of the imagination. Particularly the alternative fuel credit, given that it's "refundable" and thus acts like government spending rather than simple tax reduction. A smart tax code wouldn't include either of these policies but would levy low, consistent taxes across the board for all types of fuels and producers. But enacting retroactive tax increases is a much more egregious violation of principles of sound tax policy than either of those dumb credits.
The second effort, a proposed amendment to the Chairman's mark from Senator Robert Menendez (D-NJ), would target the oil and gas industry for punitive tax treatment by eliminating provisions like the Section 199 manufacturer's deduction or the "dual capacity" credit for them alone. If we've written it once, we've written it a hundred times: singling out oil and gas companies for higher taxes is bad tax policy and it's bad energy policy. Thankfully, the Congress has thus far largely agreed with us as the dozens of attempts in recent years to impose Menendez-like tax increases have all failed at one point in the process or another.
The Senate Finance Committee will be taking up these issues this afternoon and we hope they focus their efforts on reducing wasteful spending and not on retroactive tax hikes or tired attempts to punish an unloved industry.
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