Tax extenders are stupid tax law.

Tax extenders exist because lawmakers don’t want to reflect them in the federal deficit outlook. (Extenders avoid the 10-year tax revenue disclosure.)

To avoid making the federal deficit projections look worse than they are, lawmakers use the tax extender technique. It works like this: If a new law is permanent, you have to consider 10 years. If it’s for one year, you to need to consider only one year.

Example. The ABC tax law costs the government $1 billion a year.

If it expires in one year, lawmakers consider $1 billion against the deficit projections.

If it has no expiration date, lawmakers have to count $10 billion as negative revenue.

Business planning for extenders is somewhat tenuous because there’s no guarantee that lawmakers will extend the law for an extra year or years. Worse, sometimes lawmakers allow extenders to expire and reenact them a year after expiration. Imagine planning for that.

Okay, we’re done with the rant. Here’s what lawmakers did with the extenders when they enacted the new COVID-19 relief law on December 27, 2020.

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