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Subject: [budgetgroups] OPPOSE THE TAX CUTS - UNFAIR, COSTLY, AND FULL
OF GIMMICKS Date: Tue, 06 May 2003 18:03:41 -0400 From: Ellen Taylor
<taylore@ombwatch.org> To: "Budget News & Analysis"
<budgetgroups@lyris.ombwatch.org>

The House and Senate tax cut plans (House plan now being marked up in
the House Ways and Means Committee and expected to be on the House
floor on Friday, and Senate plan which will probably be marked up in
the Senate Finance Committee on Thursday, May 8, and is likely to be
on the Senate floor on May 13 or 14) ought to be opposed by any
reasonable taxpayer. For instance: ú Those of us who oppose costly tax
cuts altogether. There is no need to pass a tax cut at all. Even
Federal Reserve Board Chair Alan Greenspan doesn't think tax cuts are
needed right now. It's really very simple. The $2.3 trillion Bush tax
cut passed in 2001 was a huge tax cut. We don't need an annual tax
cut. The idea that we have to have a $350 billion or $550 billion tax
cut, which will ultimately morph into trillions of dollars over the
next decade, has almost no support among ordinary people, and yet
Congress seems to take passing it as a matter of course, no matter how
harmful. ú Those who are concerned with fiscal responsibility. The tax
cuts will make the budget deficit situation even worse and raise the
national debt. The worst effects will come at the same time when a
huge influx of baby-boomers are retiring, claiming Social Security
benefits and increasing health care costs. No one really thinks these
tax cuts will stimulate the economy. Instead, they will greatly worsen
our long-term fiscal situation. ú Those who oppose budget gimmicks.
Both proposals phase in provisions and then let them expire at
arbitrary times to keep the costs down. In spite of appearances, this
is not a fair compromise, and there is no doubt a lot of snickering by
tax cut advocates, who know how hard it will be to let any of the tax
cuts expire. The reason the 2001 Bush tax cut was phased in with
sunsets in 2011 was not because Congress is bound by ridiculous rules,
as the President keeps reiterating, but because Congress couldn't pass
permanent tax cuts without the costs growing even more astronomical
and busting the budget limits. The sunset years (when the tax cut
disappears - at least in theory) are included as if there were no tax
cuts to reduce the total cost. The same holds true in this year's tax
bills. For instance, does anyone think that fixing the Alternative
Minimum Tax problem for four years, from 2003 through 2006, and then
letting it return to 2001 levels in 2007 is really going to happen?
The money calculated as being saved by that maneuver is not really
being saved. This is just one example of the trickery that far
underestimates the true cost of these tax cuts. ú Those who believe
the tax code ought to be simplified rather than further complicated.
The 2001 Bush tax break is already full of complicated phasing in and
eliminating and then returning to the law as it was before the tax
cuts. The House and Senate tax cuts make a bad situation even worse,
phasing some of the 2001 tax cut provisions in early, then returning
them to the 2001 phase-in amounts, while again noting that almost
everything (except the new investment/capital gains/business tax
breaks) will expire in 2011. ú Those who think low- and middle-income
people shouldn't get truncated tax breaks, so that corporations and
the wealthy can get more of the benefits. The House version, for
instance ends tax cuts like marriage penalty relief, the child tax
credit, and an increase in the amount of earnings subject to the
lowest 10% tax bracket, in 2006, so that the tax cuts for businesses,
high-end investors, and the wealthy (increases in bonus depreciation,
expensing, operating losses, and reducing taxes on dividends and
capital gains) can continue through 2012. This is on top of the first
round of tax cuts that already mostly benefit wealthier Americans and
these tax cuts as a whole which do the same.

The House version that is being marked up can be found at:
http://waysandmeans.house.gov/media/pdf/hr2/hr2sub.pdf and the Senate
version is available at http://www.house.gov/jct/x-42-03.pdf. The
costs (note that even the $350 billion Senate tax cut is already
starting at $415 billion) as scored by the Joint Committee on Taxation
can be found at: http://www.house.gov/jct/x-43-03.pdf (Senate) and
http://www.house.gov/jct/x-41-03.pdf (House). Call your
Representatives/Senators and tell them these tax bills are
unacceptable for any or all of the above reasons.

Ellen Taylor Policy Analyst OMB Watch 1742 Connecticut Avenue NW
Washington, DC 20009 202-234-8494, ex. 211 202-234-8584 (FAX)
taylore@ombwatch.org

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