WASHINGTON - At the end of 2013, scores of federal tax breaks expired. So far, Congress has not acted to restore any of them. But that could change in this lame duck session. Members of Maine’s congressional delegation expect an effort to restore at least some of them. And if Congress does act, it could affect state revenues.
Among the expired tax credits that could be reconsidered is one that allows businesses to write off the cost of new equipment at a faster rate, tax credits to weatherize homes and one that allows some higher education expenses to be deducted. There are scores of others. And Maine Sen. Susan Collins says there is strong support from both Republicans and Democrats to restore many of them.
"That, again, is not a great way to legislate, because the fact that they were allowed to expire at all creates all this uncertainty," Collins says."And when I talk to employers and ask them why they are not hiring, that comes up over and over again."
Collins says she would prefer a comprehensive tax overhaul, but that cannot be accomplished in the short term, so she hopes Congress will extend several of the expired tax breaks for at least a few years.
Sen. Angus King agrees a comprehensive overhaul would be better, but he says a lot of work has been done on a short-term package that has broad support. "My impression is that does have a good chance of going because everybody has an interest in that bill, but I don’t know what the sentiment is in the House."
Congresswoman Chellie Pingree says House leaders have not indicated if they will schedule a tax extender bill for consideration in December. She says there are many provisions that she would like to pass on a permanent basis, but acknowledges that is unlikely.
"They are still working on it; they have proposals on the table," Pingree says. "You’re right we have a lot of tax extenders that mean a lot and economic development are our big challenge in a lot of ways. I’m keeping my fingers crossed."
State tax officials are watching developments closely. The state Economic Forecasting Committee just upped projections of state revenues by $45 million for the current budget year, and by $65 million for the two-year budget cycle that starts July 1. But, Associate Finance Commissioner Mike Allen says that was based on the assumption Congress will not act to restore any of tax extenders. Maine, like most states, piggybacks its income taxes on federal tax returns.
"If Congress doesn’t act on those extenders until late in December, the governor has usually made his decisions on the budget by then," Allen says, "and so any conformity to those are going to have to wait until later in the legislative session. That that creates a problem."
Allen says the longer Congress waits to act, the longer the federal Internal Revenue Service will have to wait to allow tax returns to be processed. He says the larger issue is what - if any - tax breaks Congress continues, whether the state will conform to them, and at what cost.
