All I can say Ted, is look into it. Many a law has been passed without knowing the long term implications.
And a prime example is Bush's tax cuts.....why the hell are you not railing against them??? You are so very transparent. I give you fact; you give back conjecture. I ask questions; you ignore them. Whom do you think you are fooling?
TAX RETURNS
A Comprehensive Assessment of the
Bush Administration’s Record on Cutting Taxes
By Isaac Shapiro and Joel Friedman
Executive Summary
Comments by Brookings economist William Gale
The Bush Administration has stood in favor of tax cuts through thick and thin. In the midst of a booming economy and large projected budget surpluses, President Bush’s top economic policy initiative — both as a candidate in 2000 and upon taking office — was to cut taxes. When the economy slowed, the Bush Administration’s response also was dominated by tax cuts. Now, in the face of yawning deficits and its own pledge to reduce them, the Administration has again put forward large, permanent tax cuts as part of its most recent budget.
This analysis offers a comprehensive review of the Bush Administration’s tax cuts. It assesses their costs, benefits to different income groups, and economic effects to date, as well as down the road. It both synthesizes previous findings about the individual tax measures and includes new findings about their combined effects, using new distributional analyses by the Urban Institute-Brookings Institution Tax Policy Center and fresh cost estimates by the Center on Budget and Policy Priorities.
The early returns on the effects of the tax cuts have not been good.
The Bush tax cuts have contributed to revenues dropping in 2004 to the lowest level as a share of the economy since 1950, and have been a major contributor to the dramatic shift from large projected budget surpluses to projected deficits as far as the eye can see.
The tax cuts have conferred the most benefits, by far, on the highest-income households — those least in need of additional resources — at a time when income already is exceptionally concentrated at the top of the income spectrum.
The design of these tax cuts was ill-conceived, resulting in significantly less economic stimulus than could have been accomplished for the same budgetary cost. In part because the tax cuts were not as effective as alternative measures would have been, job creation during this recovery has been notably worse than in any other recovery since the end of World War II.
If the Administration’s latest tax proposals — which would make permanent most of the tax cuts enacted in 2001 and 2003 and establish new tax cuts on top of that — are enacted, the long-term results are likely to be even more troubling. Over the next 10 years, total tax-cut costs will equal $3.9 trillion, reaching nearly $600 billion or 3.3 percent of the economy in 2014 alone. (These calculations include the effects of the higher interest payments caused by the tax cuts.) The resulting higher deficits will slow future economic growth, saddle future generations with sizable interest payments, and leave the nation ill-prepared not only for the retirement of baby boomers but also for responding to potential future crises — from security matters to natural or environmental disasters — the particulars of which are unknown today.
Pressure to reduce these deficits will mount. Because the tax cuts are so tilted toward the highest-income households — and become even more so over time, as some of the upper-income tax cuts phase-in — the burden of financing these lopsided tax cuts ultimately is likely to be borne disproportionately by households who gain only modestly from the tax cuts. This will be the case unless offsetting spending cuts or tax increases are enacted that reduce benefits or raise taxes primarily on high-income households. As a result, over the long term most Americans may well be net losers from the tax cuts.
Cost of Tax Cuts
The Tally So Far
The three rounds of tax-cut legislation (in 2001, 2002, and 2003) account for a substantial share of the nation’s current deficit.
The tax cuts would reduce revenues by $276 billion in 2004, according to Joint Committee on Taxation estimates. Further, the interest costs associated with the enacted tax cuts would equal $20 billion, using Congressional Budget Office assumptions. The total cost would therefore be $297 billion, or 2.6 percent of the economy (or GDP).
Using these estimates, the cost of the tax cuts account for more than half of the 2004 deficit, which CBO estimates to be $477 billion or 4.2 percent of GDP. Based on these estimates, the deficit would have been 1.6 percent of GDP without the tax cuts. [See Table 1]
These calculations, however, do not take into account the economic effects of the tax cuts. Most economic analyses suggest that the tax cuts have had some positive effect on the economy in the short run — at issue is the extent of this positive effect given their cost. These positive effects would make the short-run revenue losses associated with tax cuts somewhat smaller, and estimates of the deficit without the tax cuts somewhat higher. Nevertheless, even using the Administration’s assumptions about the economic effects of its tax cuts, the tax cuts would still account for 45 percent of the 2004 deficit.
Indeed, the contribution of the tax cuts to the current deficit exceeds the contributions attributable to other factors, such as the economic downturn. A new CBO study finds that the direct effects of the business cycle account for only six percent of the 2004 deficit. Furthermore, when the cost of all legislation enacted since 2001 is considered, the tax cuts are found to cost more than all program increases combined, including increases in military expenditures, homeland security, and education spending. Domestic discretionary spending (which is funded on an annual basis) is now being singled out by the President and Congress for reductions. The cost of the tax cuts, however, is 18 times the cost of the increases in domestic discretionary spending. [see Table 2}
In 2004, CBO estimates that federal revenues will fall to their lowest level as a share of GDP — 15.8 percent — since 1950. The revenue base will be smaller, as a share of the economy, than it was before programs such as Medicare, Medicaid, and the interstate highway system existed. In contrast, total federal spending in 2004 is not estimated to be at particularly high levels as a share of the economy. CBO projects that federal spending will equal 20.0 percent of GDP in 2004, a level that is lower than in the 22 years from 1975 to 1996.
Unprecedented Use of Gimmicks
Research by Brookings Institution economists William Gale and Peter Orszag underscores the extent to which the design of the tax cuts has relied on budget gimmickry. They found that in the 1990s, the practice of having tax cuts appear to expire — that is, of enacting tax cuts ostensibly scheduled to expire after a few years when the intention and likely actual outcome was to have the tax cuts become a permanent fixture of law — was employed on a modest scale. The practice exploded, however, with the 2001 tax-cut legislation.
Gale and Orszag, citing CBO data, show that at the start of 2001 the cost ten years down the road of extending all tax-cut measures in law that had a temporary status was $22 billion. By contrast, if the temporary tax-cut provisions in place today are all extended, their cost in ten years (i.e., in 2014) will be $431 billion.
The Administration has engaged in ongoing efforts to obscure the ultimate costs of its tax cuts. These efforts are reflected in the Administration’s current budget, released in February 2004. The budget shows deficit figures only over the next five years, which obscures the likely growth of the deficit in the second half of the coming decade under the Administration’s proposals, with the large deficits driven in significant part by its proposal to make the tax cuts permanent.
In addition, in its current budget, the Administration proposes new tax-advantaged savings and investment accounts that feature striking timing gimmicks. As a result, this proposal raises revenue over the first five years. But the proposal would cause increasingly large revenue losses after that. The proposal ultimately is likely to cost the equivalent of $35 billion a year.[1]
Continued.............
cbpp.org |
