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tax topics

2010 Budget Tax Proposal

Continue remaining expiring provisions through CY 2010

The revenue code includes more than 80 “temporary” tax incentives, many of which have been extended one year at a time for a decade or more. The most significant in terms of revenue provides temporary relief from the Alternative Minimum Tax (a provision discussed elsewhere in this review). Most others are highly targeted subsidies that benefit business. The most significant of these in terms of revenue is the research and experimentation credit (also known as the research and development credit). Others encourage a broad range of investment from alternative energy to low-income housing.

The Administration baseline includes permanent extension of AMT relief. The 2009 AMT parameters—exemptions, rate brackets, and phaseout thresholds—are made permanent and indexed for inflation at a ten-year cost of $575 billion. The president proposes making the research credit permanent at a cost of $74 billion over 10 years and extending other expiring provisions for an additional year through 2010 with a one-year cost of more than $10 billion.

Observers disagree over whether annually extending these tax benefits is good policy or whether it would be better to treat them as permanent provisions of the tax code. Proponents argue that temporary tax cuts allow for regular congressional review while critics say this review process has become a sham.

Additional Resources
Tax Policy Briefing Book: Taxes and the Budget: What are extenders?
Tax Extenders and Fiscal Responsibility, TaxVox, May 29, 2008
Estimated Budget Effects of the Tax Provisions Contained in an Amendment in the Nature of a Substitute to H.R. 1424 (JCX-78-08), Joint Committee on Taxation, October 2008