Special interests aim to pile onto tax-cut deal, to retain tax credits
Wind power firms, makers of energy-efficient windows, duck hunters, and other special interests are pushing Congress to save – or shelve – some 83 expiring tax credits.
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And, since it’s cold outside, how about some tax consideration for people who want to insulate their attics this winter?
Then, who can forget the importance of giving a tax break to the Champion family, who have lived on the same Vicksburg, Miss., farm for six generations? But it’s not just any farm. It’s where Ulysses Grant fought the battle of Champion Hill.
Congress may still resolve many of the big-ticket tax-cut items, but plenty of people and organizations are still lobbying Congress to remember them, as well. Almost all of these groups are scrambling to get Congress to renew one tax credit or another. In many cases, they are warning that failure to do so may result in thousands of layoffs.
“This is by the far the most tax uncertainty we have had at the end of the year since the income tax was instituted in 1913,” says Pete Davis, a tax expert at Davis Capital Investment Ideas in Washington and an author of the blog Capital Gains and Games.
At least 83 federal tax provisions expire at the end of the year, according to Congress's Joint Committee on Taxation website. Many of those were renewed when President Obama and the Republicans reached their agreement to extend the Bush-era tax rates for another two years. The total of expiring tax credits represents a significant amount of money.
“We are talking $30 billion, probably closer to $40 billion and maybe much higher, depending on how long they extend them,” says Mr. Davis, who worked for 11 years as an economist on the Joint Committee on Taxation.
Up for renewal are billions of dollars in energy tax credits – many of them aimed at getting consumers to buy something. For example, there are expiring tax credits for new energy-efficient homes, the installation of insulation, and more efficient windows in existing homes.
“We count on that tax credit,” says Rick Gerardi, vice president at MASCO Home Services, a large provider of insulation and energy efficiency services based in Taylor, Mich. In the case of insulation, homeowners currently receive a tax credit of as much as $1,500 for materials – although not for installation – that make their homes more energy efficient.
“We believe there will be a sharp dropoff in demand if that tax credit is not renewed,” says Mr. Gerardi. “What that tax credit does is allow us to discount upfront costs and puts that work on sale, and quite frankly, in tough times where people are concerned about borrowing, this is a very important thing.”
Still others are aimed at helping relatively young sectors, such as solar and wind energy. Without the renewal of those tax credits, referred to in Washington jargon as “tax extenders,” the industries claim tens of thousands of workers could be laid off.