CBO Predicts 2015 Tax Breaks Will Increase Deficit Projections
According to a report entitled “Budget and Economic Outlook: 2016 to 2026” by the Congressional Budget Office (CBO), in 2016, the federal budget deficit will increase, in relation to the size of the economy, for the first time since 2009. The CBO predicts the federal deficit will grow by about $8.5 trillion from 2016 to 2025, up from previous estimates of $7 trillion, and the CBO estimates that the permanent extension of tax breaks approved by Congress and signed into law by President Obama at the end of 2015 account for about half of the CBO’s projected $1.5 trillion 10-year increase.
Included in the tax extender legislation that was signed into law in December was the permanent extension of the 9 percent minimum Housing Credit rate. Congress had first temporarily created a 9 percent minimum Housing Credit rate in the Housing and Economic Recovery Act of 2008, and has since extended it twice. However, the minimum rate effectively expired at the end of 2013. Congress passed tax extender legislation at the end of 2014, retroactively extending the temporary minimum 9 percent Housing Credit rate for 2014. This retroactive extension provided no practical benefit for the Housing Credit program because Housing Credit allocating agencies had already allocated their 2014 credits by the time Congress passed the bill. The tax extenders law also extends the New Market Tax Credit through the end of 2019 and the deduction for private mortgage insurance premiums paid or accrued in 2015 and 2016.