What to do about the tax extenders—or, as my colleague Donald Marron calls them, the “tax expirers”? Restoring the current crop (most of which expired on December 31) for 10 years would add about $900 billion to the deficit. House Ways & Means Committee Chair Dave Camp (R-MI) and Senate Finance Committee Chair Ron Wyden (D-OR) have pledged to address these extenders, though in very different ways. Camp would take them on one by one this year, making some permanent and killing others.  Wyden (and senior panel Republican Orrin Hatch of Utah) would restore nearly all of them but only through 2015. Clearly, as my colleague Howard Gleckman suggests, we need to rigorously examine the merits of each one. But after paring out those we don’t want, should we make the rest permanent as Camp and many lawyers and accountants favor? Or should we keep them on temporarily? Making them permanent would reduce complexity and uncertainty. But keeping them temporary would allow Congress to regularly review them on their merits. I believe that, with a few exceptions, most should not be made permanent. However, I’d extend most of them for a more than a year at a time according to the purpose they are meant to serve. Why not make them permanent?  As Professor George Yin of the University of Virginia School of Law has argued, most of these provisions really look more like spending than taxes.  We must distinguish, therefore, between those items that legitimately adjust the income tax base, and those that, like direct expenditures, subsidize particular activities or persons, or respond to a temporary need. In my forthcoming book, Dead Men Ruling, I lay out the many complications that arise when elected officials make too many subsidies permanent. Over many decades, lawmakers have effectively destroyed the very flexibility government needs to adapt to new needs and demands over time.  Making the extenders permanent would tie even tighter the fiscal straightjacket we have placed on ourselves. Fiscal reform demands retrenchment, not expansion, of the extraordinary power of permanent programs to drive up our debt and override the ability of today’s and tomorrow’s voters to make their own political choices. Now onto a more complicated but related issue.  The way Congress handles tax subsidies such as extenders should be treated similarly to the way it handles direct spending subsidies. But doing this requires addressing some tricky budget accounting problems. Direct expenditures can be divided into two categories: mandatory spending, often called entitlements, and discretionary spending.  Discretionary spending, in turn, has multiyear and single-year spending programs.  Both must be appropriated occasionally.   To simplify, let’s call permanent tax subsidies “tax entitlements” and tax extenders “tax appropriations.” The Congressional Budget Office (CBO) treats direct entitlements and tax entitlements similarly, projecting them perpetually into the future. If legislation enacted decades ago requires those entitlements to grow, CBO will treat that growth as part of the baseline of what the public is promised by “current law.” But CBO does not treat direct appropriations and tax appropriations similarly.  It assumes that direct appropriations will be extended either according to the program rules in effect (as in the case of most multi-year appropriations) or in aggregate (as in the case of most annual expenditures).  In contrast, CBO assumes that tax extenders or tax appropriations expire at the end of each year. Continuing temporary tax extenders would be scored as adding significantly to the deficit, whereas extending many or most appropriations at current levels would not. These inconsistent budget accounting rules mean we need to rethink how Congress treats temporary tax subsidies. If they are not going to be made into permanent tax entitlements, then, as far as practical, they should be treated closer to multiyear or annual tax appropriations.    Multiyear often makes more sense for planning purposes.  Of course, subsidies that are truly meant to be temporary, such as anti-recession relief, should be treated as if they end at a fixed date.  The net result would be that when most “tax appropriations” other than those clearly meant to be temporary meet the end of some arbitrary extension period, CBO would no longer project their future costs at zero. However one slices it, Congress needs to avoid making permanent or converting into entitlements even more subsidy programs, whether hidden in the tax code or not.  At the same time, it must address its inconsistent budget accounting rules for direct appropriations and those extenders that are really little more than appropriations made by the tax-writing committees.