“Tax expenditures,” or special tax breaks targeted at particular activities or parties, are in desperate need of reform. In a report released by CTJ last November we explained how the current political climate, as well as dysfunctional procedural rules in Congress, have created a situation in which lawmakers have become much too willing to rely on tax breaks to accomplish their favored goals. Fortunately, a bill introduced by Rep. Mike Quigley (D-IL) just last week seeks to rein in some of the most destructive tendencies toward excessive tax breaks by counteracting the unwarranted advantages that tax breaks enjoy in the policymaking process.
While the first half of HR 5752 deals with general budget process reforms, it's the latter half of the bill with which CTJ is most interested. Among the tax expenditure reforms contained in this part of the bill is a requirement that all tax expenditures be reviewed by CBO at least every four years. Those reviews would result in a recommendation to Congress regarding what should be done with each tax expenditure, and in doing so would use many of the same criteria contained in the recently proposed “tax extenders study." This requirement somewhat resembles a proposal put forth in CTJ's November 2009 report that the Executive Branch conduct these reviews as part of their regular assessments of government performance.
HR 5752 also seeks to encourage lawmakers to make use of these CBO reviews, and of a variety of other improvements in tax expenditure data required by the bill. Specifically, HR 5752 would require that the tax-writing committees in both the House and Senate hold public hearings on the findings released by CBO. The Treasury Department and OMB would also be required to provide comments on the reviews.
More importantly, HR 5752 requires that any effort to enact a new tax expenditure (or enlarge an existing one) include a provision that would eliminate the tax expenditure at a point 10 years in the future. This sunset requirement would eliminate the “auto-pilot” feature enjoyed by many tax breaks by requiring lawmakers to periodically reconsider whether these policies are effective, and to vote on whether or not to continue them. While a 10-year sunset provision isn't the same thing as requiring regular reauthorization and reappropriation — as is done with discretionary spending — it is a meaningful step toward leveling the playing field between these two types of policies.
Another one of HR 5752's more important components is a requirement that bills enacting or expanding a tax expenditure receive approval not only from the tax-writing committee, but from the relevant subject-matter committee as well. Under HR 5752, for example, the House Ways & Means Committee would no longer be given sole jurisdiction over the plethora of tax breaks given to energy companies. Any bill seeking to expand upon such breaks would also have to receive approval from the House Committee on Energy and Commerce before being brought to the floor of the House. By allowing other relevant committees a say in measures related to their specific areas of policy, the power of the tax-writing committees to legislate on almost any issue imaginable could be scaled back by HR 5752.
For more on HR 5752, see this release from Rep. Quigley's office. And to see a comparison of tax expenditures and other spending programs in various policy areas, be sure to see this April report from CTJ.