Someday, the wolf and the lamb will lie down together, and, shortly thereafter, perhaps, Republicans and Democrats will pass tax reform. It shouldn't be that hard, actually, given the broad recognition in both parties that exchanging lower tax rates for a reduction in loopholes would be good for both fairness and efficiency. But every loophole has a lobby, and so even though President Barack Obama has floated a corporate reform proposal and Rep. Dave Camp, R-Mich., tried to jump-start individual and corporate reform this year, there is no realistic prospect for a bill.
In the meantime, Congress carries on, unredeemed and seemingly irredeemable. The Senate just fell apart over the "tax extenders" bill. The legislation would have renewed for two years more than 50 tax breaks that expired at the end of 2013, at a 10-year cost of $85 billion. The measure passed the Finance Committee on a voice vote April 3, enjoyed wide bipartisan support and seemed headed to a vote on the floor — until Republicans filibustered Thursday, because, they said, Senate Majority Leader Harry Reid, D-Nev., would not let them offer amendments. Apparently, the GOP wanted to hold a vote on repealing the medical-device tax, which helps finance the health care reform law.
There may be no tax extenders bill until after the November election, unless the two parties can resolve this kerfuffle. The impasse is causing great upset among the various special interests — from wind-energy companies to stock-car racing — that live off its provisions. A delayed extenders bill endangers broader corporate provisions as well, such as the widely used and economically defensible research and development tax credit.
Still, we're not all that concerned. The best that can be said for the Senate bill is that its sponsor, Sen. Ron Wyden, D-Ore., swears it's the last such smorgasbord of his finance chairmanship and, therefore, the prelude to tax reform. Maybe. What's certain is that Wyden was unable to sell his colleagues on a way to pay for the bill, so its entire cost would add to the federal deficit. This is fiscal irresponsibility, pure and simple.
Meanwhile, the Republican-led House is voting on extending the various tax breaks one by one, starting with a permanent, but unpaid-for, extension of the R&D credit – despite a veto threat from Obama. The White House is unhappy with the cost of the Senate bill, too, but it didn't threaten a veto, in deference to its Democratic allies in that chamber.
This may be one of those times when no bill is better than a bad bill. Certainly it won't be the end of the world if both the House and the Senate have to ponder this turkey a while longer, during which time they may come up with a way to pay for it – or even the gumption to end the absurd annual "tax extender" ritual once and for all.