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1 C. R. Cahoon, Tax Expenditures and Sunset 1 (1979)

handle is hein.tera/nsur0001 and id is 1 raw text is: TAX EXPENDITURES AND SUNSET By C. R. Cahoon, Senior Tax Associate Mobil Corporation I. Purpose of Paper Two bills currently before the Congress would, if enacted, require authorization of the new budget authority for, and review of, Government programs on a predeter- mined schedule. These sunset bills are S 2 in the Senate, which is sponsored by Senator Muskie (D-Me.) and 62 other senators, and HR 2, which is sponsored in the House by Congressman Blanchard (D-Mich.) and 164 other congressmen. Support for these measures by the Democratic Caucus has come in the form of a resolution which urges the House Rules Committee to consider sunset legislation for all government spending programs and the House Ways and Means Committee to consider similar legis- lation which would apply to tax expenditures. This paper will review the development of the tax expenditure concept, the current legislation as it pertains to tax expenditures, and explain why tax expendi- tures should not be subjected to a sunset review process. II. Definitions of Sunset Legislation and Tax Expenditure Simply stated sunset legislation, if enacted, would require the automatic termination of specific spending programs unless they are reviewed and reenacted by Congress on a predetermined schedule. The concept of tax expenditure was first enunciated in 1967 when former Assistan t Secretary of the Treasury, Stanley Surrey(l) stated: ...through deliberate departures from the accepted concepts of net income and through various special exemptions, deductions and credits, our tax system does operate to affect the private economy in ways that are usually accomplished by expenditures--in effect to prcduce an expenditure system described in tax language. For current operational purposes the Congressional Budget Office and the Treasury use the simplistic definition of taz expenditures included in the 1974 Budget Act which is revenue losses attributable to provisions of the Federal tax laws which allow a special exclusion, exemption, or deduction from gross income or which pro- vide a special credit, a preferential rate of tax, or a deferral of tax liability. Extensive use is also made of a further definition contained in the legislative history of the 1974 Budget Act that tax expenditures are exceptions to the normal structure of the individual and corporation income taxes. III. Discussion of Application of Sunset Concept to Tax Expenditures Although the inclusion of tax expenditures in budget figures has been required since the enactment of the 1974 Budget Control Act, the first attempt to subject tax expenditures to periodic review and possible automatic termination came in 1976 (1) The United States Income Tax System - The Need for a Full Accounting given before a financial group, the Money Marketeers, November 15, 1967.

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