Tax Breaks Officially Expire for Year End - Which Ones Will be Affected?Tax Professionals' Resource
January 2, 2014 — 1,436 views
A decision that may affect many individuals and businesses severely, the US administration has decided to let the package of a total of fifty-five popular tax break expire at the end of the year, 2013. This practice of the lawmakers to let these tax breaks expire and then finally renewing, is creating a headache for many as they are not able to plan for their future. People are now vigorously protesting against this practice as they feel it is a foolish way of running the tax system. These tax breaks are very important for certain organizations like companies investing in research and development and the amount runs into billions of dollars.
Reactions to this Practice of Running out Tax Breaks
Many politicians cutting across party lines have reacted sharply against this practice. For instance, John Lewis--a democrat, said this practice shows the divided and impaired mentality of Congress which battles to pass even an ordinary legislation. He used strong words like ‘unfair’ and ‘shameful’ to describe this practice. However, it has to be understood that with the implementation of such tax breaks, the government fails to earn enough revenue and loses out on a lot of money. The deficit is only going to mount further if adequate measures are not taken. This excuse given by Congress, however, is not the best as there are other ways to manage this problem such as giving such tax breaks only to those companies who have clean record and work in critically important sectors.
Significant Tax Breaks which are About to Expire
There are many tax breaks given to critical industries which are about to expire. Here are some of the major ones:
- Exemptions given out to multinational banks and insurance companies to protect their foreign profits from getting taxed. A total of 9.4 billion dollars is at stake.
- Tax credit given to companies producing renewable sources of energy like wind and solar which could result in a saving of 12 billion dollars for these companies over the next decade.
- Tax credit given to companies doing research and development work like the pharmaceutical sector that would save them 6.2 billion dollars.
- A tax break which allows establishments making a lot of profit to write off large capital spending immediately.
The best thing to do under these circumstances is to prepare for the worst and hope for the best.