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By Marc Heller
Dec. 16 — If multi-billion dollar tax benefits for research and business expensing are the bones of the tax deal Congress is poised to enact, smaller tax breaks for teachers, farmers and corner stores may be the joints that keep it together.
The so-called tax extenders bill lawmakers are likely to pass on Dec. 17 is full of changes aimed at specific industries or groups of taxpayers, some of which have sought action for years.
Teachers will see a bigger and permanent deduction for the school supplies they buy. College students will be able to use tax-preferred savings accounts to buy computers. Restaurants and retailers will be able to shorten the depreciation period for certain improvements, making them more financially attractive.
The list goes on and on, reflecting lawmakers' efforts to tune the tax code to industries in their states or congressional districts, or to appeal to specific causes such as higher education or help for low-income families. Many cost in the millions—not billions—of dollars in forgone revenue to the government, a fraction of the fiscal footprint of items such as the research credit, which the Joint Committee on Taxation estimated at $113 billion from 2016 to 2025 (JCX-143-15).
“I think for each one of those constituent groups, of course, those are important. We've already received phone calls from a lot of those groups saying ‘thank you for your work in that area.' ” said Rep. Dave Reichert (R-Wash.), a member of the House Ways and Means Committee. “Even with a teacher who's spending $500 a year not knowing if that deduction is available, it creates a world of uncertainty.”
The House is set to take up the measure Dec. 17, with the Senate to closely follow. Although many Democrats may vote for it, others—such as Rep. Sander M. Levin (D-Mich.), ranking member on the House Ways and Means Committee—will be “no” votes.
Among other objections, Levin said in a letter to fellow Democrats Dec. 16, the measure doesn't index the Child Tax Credit for inflation but it does index some business-related provisions. “While I support strong tax policy that provides certainty to individuals and American businesses, I cannot support this legislation as it currently stands,” he said.
The deduction for school supplies would be capped at $250 and would be newly indexed to inflation beginning in 2016. Lawmakers also made the deduction available for professional development expenses, bringing the deduction's cost to $2.9 billion from 2016 to 2025.
Other provisions include:
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Texts of the tax extenders bill,Protecting Americans From Tax Hikes Act, a summary of the extenders bill, and Joint Committee on Taxation report (JCX-143-15) are in Taxcore.
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