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JCT’s first ‘dynamic’ score shaves $10 billion from cost of expired provisions

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Tax Hot Topics:‘Dynamic’ score shaves $10 billion from cost of expired provisionsThe Joint Committee on Taxation (JCT) has estimated that the economic benefits of extending the 50-plus provisions that expired at the end of 2014 would trim the original estimated cost of their extension from $97 billion to $87 billion. The new estimate represents the first “dynamic” score since House Republicans adopted a rule requiring the JCT to consider the overall economic impact of tax changes when estimating their revenue affects.

The JCT applied the method to the Tax Relief Extension Act of 2015, which the Senate Finance Committee recently approved. The act would generally reinstate all of the expired provisions for 2015 and extend them through 2016. The JCT said the business provisions, particularly bonus depreciation, would lower the after-tax cost of capital and create economic growth that would lead to $10 billion more in tax receipts.  

The new score doesn’t affect the outlook for the extender provisions much, as few lawmakers are calling for revenue offsets. But it may bode well for tax reform. The dynamic effects of sweeping changes from tax reform could be much greater.

House Ways and Means Chair Paul Ryan, R-Wis., said he will begin negotiating a compromise on the extenders after returning from the August recess in September. Republican leaders hope to resurrect a failed deal from late last year that would make a handful of provisions permanent and extend the rest for two years. Tax Legislative Update 2015-04 discusses the outlook for the extenders and includes a table describing how House and Senate legislation would treat each provision. Despite Ryan’s efforts, the extenders may not be resolved until late in the year unless lawmakers try to attach them to international reform or highway spending.

Ryan is trying to draft an international reform package that would combine a reduced rate for income generated by domestic intellectual property with a transition to a territorial system and one-time tax on all unrepatriated earnings. The hope is to dedicate some of the revenue from the one-time tax to highway spending and use the highway bill as a vehicle for the reform package.

Many Republicans are still opposed to using revenue from tax changes to pay for spending. Ryan could try to balance such a package by adding permanent extensions of expired provisions, which are scored as tax cuts but face less opposition. Ryan has so far not released any part of his reform package besides his endorsement of an “IP box” proposal from Reps. Charles Boustany, R-La., and Richard Neal, D-Mass. See our summary of the proposal for more information.

Contacts
Mel Schwarz
+1 202 521 1564
mel.schwarz@us.gt.com

Dustin Stamper
+1 202 861 8144
dustin.stamper@us.gt.com

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