Dems Accuse GOP of Hypocrisy for Supporting Costly Tax Credit

A research and development bill would cost $156 billion over 10 years — and Republicans have not proposed revenue to offset it.

House Minority Whip Steny Hoyer (D-MD) speaks at a press conference on immigration reform on Capitol Hill in Washington, D.C., November 13, 2013. 
National Journal
Billy House
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Billy House
May 8, 2014, 3:50 p.m.

Des­pite a White House veto threat, the GOP-led House plans to vote Fri­day on a bill mak­ing per­man­ent a re­search-and-de­vel­op­ment tax cred­it for busi­nesses — without off­set­ting the $156 bil­lion cost over the next dec­ade.

The White House and some Demo­crats who op­pose the meas­ure as-is have ac­know­ledged they sup­port the aim, but they won’t back the bill be­cause they say it rep­res­ents a case of polit­ic­al in­con­sist­ency — if not hy­po­crisy. They point out that Re­pub­lic­ans con­tin­ue to in­sist that an ex­ten­sion of long-term un­em­ploy­ment in­sur­ance be fully paid for.

Minor­ity Whip Steny Hoy­er told re­port­ers this week that “we are for the R&D tax cred­it,” but that Re­pub­lic­ans “are do­ing the right thing in the wrong way.”

Ma­jor­ity Lead­er Eric Can­tor re­spon­ded to the Demo­crat­ic po­s­i­tion­ing by call­ing it “iron­ic” and proof that Demo­crats are “all talk and no ac­tion on jobs,” which he said the meas­ure will help to pro­duce.

Mean­while, as a pre­curs­or to the floor vote, the Of­fice of Man­age­ment and Budget on Tues­day re­leased a state­ment say­ing the pres­id­ent will be ad­vised to veto the meas­ure if it passes both cham­bers. The state­ment de­scribed the pro­jec­ted cost as adding to the na­tion’s de­fi­cit over 10 years “more than 15 times the cost of the pro­posed ex­ten­sion of the emer­gency un­em­ploy­ment be­ne­fits.”

But Can­tor ar­gued, “This has been a pro­vi­sion that has ex­pired over and over again over the last 30 years.” He ad­ded, “This is one of the most gen­er­at­ive things we can do from a policy stand­point that has been con­firmed by in­de­pend­ent eco­nom­ic ana­lys­is, to grow jobs and to have Amer­ica work again for more people.” 

Can­tor noted that “the pres­id­ent him­self has come out on re­cord to be for the per­man­ent ex­ten­sion of [the] R&D tax cred­it.”

In fact, in its state­ment this week, OMB did ac­know­ledge that the ad­min­is­tra­tion would be sup­port­ive of mak­ing the R&D cred­it per­man­ent — that is, if the costs of the bill were off­set by such things as clos­ing tax loop­holes, for in­stance.

OMB even lauded the meas­ure as one that would al­low busi­nesses to make in­vest­ments now with con­fid­ence that they will be eli­gible for the cred­it in the fu­ture. And four-fifths of the R&D cred­it, the White House ex­plained, is at­trib­ut­able to salar­ies of U.S. work­ers per­form­ing U.S.-based re­search — mean­ing that the cred­it helps cre­ate high-skilled jobs and en­cour­ages new in­nov­a­tions and fu­ture pro­ductiv­ity.

But it also noted that House Re­pub­lic­ans had passed a budget res­ol­u­tion that re­quired off­set­ting any tax ex­tenders that were made per­man­ent with oth­er rev­en­ue meas­ures. Re­pub­lic­ans “are rush­ing” to make busi­ness tax cuts per­man­ent, OMB said, but are pro­pos­ing to let oth­er im­prove­ments to the Earned In­come Tax Cred­it, Child Tax Cred­it, and tax cred­its for edu­ca­tion ex­pire.

“The ad­min­is­tra­tion wants to work with Con­gress to make pro­gress on meas­ures that strengthen the eco­nomy and help middle-class fam­il­ies, in­clud­ing pro-growth busi­ness tax re­form,” the White House said. “However, mak­ing tra­di­tion­al tax ex­tenders per­man­ent without off­sets rep­res­ents the wrong ap­proach.”

Hoy­er com­plained that when it comes to feed­ing chil­dren and “help­ing people who are un­em­ployed through no fault of their own, as­sist­ing people struck by a vi­cious storm named Sandy — then there’s a lot of dis­cus­sion on the Re­pub­lic­an side about, ‘we have to pay for things.’ “

But when it comes to tax cuts, Hoy­er said, there’s a dif­fer­ent GOP tune.

“This takes no cour­age to put on the floor or to vote for. None. Zero. Zip. Tax cuts are easy to vote for,” Hoy­er said. “Pay­ing for what you buy is dif­fi­cult to vote for. And all of the wringing of hands and gnash­ing of teeth with ref­er­ence to the de­fi­cit seems to go by the boards when the Re­pub­lic­ans talk of tax cuts.”

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