May 19, 2004
A PERMANENT TAX CODE?, NOT WITHOUT CONSTITUTIONAL AMENDMENTS:
Budget Deal Reached, but Outlook in the Senate Is Unclear: Republican Congressional leaders reached a tentative budget compromise on Tuesday that would extend several of President Bush's major tax cuts. (EDMUND L. ANDREWS, 5/19/04, NY Times)
The plan tries to resolve a battle between the House and the Senate over whether to require that new tax cuts be financed by either spending cuts or tax increases in other areas. The Senate's budget resolution includes such a requirement, but the House's does not; House Republican leaders and the Bush administration have adamantly opposed any restrictions on tax reduction.The compromise reached Tuesday would impose that "pay as you go" requirement for one year while exempting three popular elements of last year's big tax-cutting package that are scheduled to expire at the end of this year. The three provisions are an expansion of the 10-percent tax bracket for lower-income households, an increase in the child tax credit and adjustments aimed at reducing the "marriage penalty" among two-income families.
Under the agreement, Congress, contrary to what Mr. Bush has been seeking, would not make any of the tax cuts permanent. Instead, lawmakers would have to revisit them in their entirety again next year.
Congressional analysts have estimated that extending the three tax cuts that are exempted under the deal would cost more than $500 billion over the next 10 years, and that extending all of Mr. Bush's tax cuts could cost nearly $2 trillion over 10 years.
House and Senate Republicans have been sorely split over the budget for weeks, and many lawmakers had begun to despair of reaching any agreement at all.
Wasting energy fighting to make them all permanent is silly anyway, because the code needs to be totally overhauled next year. Posted by Orrin Judd at May 19, 2004 9:58 AM
Any analyst worth his/her salt should not deem the static tally of a tax cut as a ceratin loss in revenues. More accurately would be to say that "all else equal", they would reduce revenues by...This should then be followed by discussing what imapact tax cuts have had on other economic variables, and what impact these variables would have on government revenues.
For example, in the wake of Bush's "reckless", and "costly" tax cuts, GDP growth and tax receipts (at both the federal and many state level) have exceeded analyst projections. Econometric analysis suggests that a fraction of this windfall resulted from the effects of the cuts on markets and the economy. All else was not equal. And what was not equal offset the static cost.
It could be argued that the same could be done to "mitigate" the true costs of additional spending, but the evidence there is far less compelling, and even the spend crowds sacred cow -- FDR's New Deal -- is now being gored.
Posted by: MG at May 19, 2004 11:13 AMThis is one of those votes we were talking about yesterday that would make Kerry squirm, because he'll either have to go against his party line and depress his base, or explain to independants why he voted for a tax increase... or not show up for the vote. None of the three particularly help him.
Yet another reason why Senators don't become president without a lot of dead people voting in Chicago.
Posted by: MarkD at May 19, 2004 8:02 PM