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EXTENDERS HUNG UP UNTIL AFTER THE ELECTION

September 29, 2006

Congress is going home without passing the "extenders" bill for this year. The bill would extend a passel of tax provisions that have been enacted for only one or two years at a time, many for the past 20 years. The largest of these is the research credit, but the college tuition deduction and the $250 deduction for teachers who buy shcool supples also expired January 1.

Congress usually passes these routinely, but they got hung up when they were yoked to the proposed estate tax reform bill.

Most of these provisions are poor tax policy. Congress would be better off just having lower rates and then let people and businesses decide for themselves how to spend their money. But if the breaks themselves are poor policy, passing them for one year at a time is really awful. They do it that way to disguise the real cost.

I expect Congress to quietly re-enact the provisions in a post-election lame duck session. I don't expect them to get out of the habit of doing so temporarily; that would cost them the opportunity to re-sell their souls to lobbyists every year or so to re-extend the provisions.

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