Tax Day

As people around the country bring last-minute work on their tax returns to a close today, the House Republican leaders are gearing up for their annual "Tax Freedom" day – a time for denigrating government spending and the taxes that enable the government to provide the services that help support the country. This year, the legislative focus of their Tax Freedom day is likely to be the introduction, on April 18, of legislation to make permanent last year’s $1.35 trillion tax cut, which expires (or "sunsets") at the end of 2010.

As people around the country bring last-minute work on their tax returns to a close today, the House Republican leaders are gearing up for their annual "Tax Freedom" day – a time for denigrating government spending and the taxes that enable the government to provide the services that help support the country. This year, the legislative focus of their Tax Freedom day is likely to be the introduction, on April 18, of legislation to make permanent last year’s $1.35 trillion tax cut, which expires (or "sunsets") at the end of 2010.

The tax cut’s short duration was a direct result of its size and enormous cost to the federal government – the only way to cram the tax cut into the program and tax cut spending limits agreed to by the House and Senate last year was to have the tax cuts end after 2010. In all, 87% of the 10-year tax cut will not take effect until the second 5-year period, beginning in 2008, according to the Center on Budget and Policy Priorities (CBPP). This has created some bizarre situations. For example, full repeal of the estate tax will only come after an 8-year phase out, and will only last for 1 year. For other tax cuts, including those that benefit middle-income tax payers, it will mean either an early termination date or a later effective date. The adjustments made to the Alternative Minimum Tax (AMT), necessary to prevent millions of middle-income tax payers from owing more on their income taxes because of the President’s tax cut, for example, will last only 4 years and end in 2006.

Ironically, though the country’s ability to pay for expensive tax cuts that favor the most wealthy among us has only decreased over the last year, while its need for government spending has continued to increase, House Republicans and President Bush have made it clear that making the tax cuts permanent will take precedence over paying for more teachers, providing access to job training centers for workers around the country, health care for the uninsured, and an adequate, affordable prescription drug plan for seniors, among the many other spending options people around the country prefer over tax cuts.

A recent CBPP analysis derived from the Congressional Budget Office’s calculations shows that making all of the tax cuts permanent would cost an additional $397 billion – just in 2011 and 2012, alone – this would translate into a $4 trillion drain on the federal budget over the decade beginning in 2012. According to CBPP’s analysis, when the tax cut has taken full effect, just that part of it that benefits the top 1% of the nation’s wealthiest will be 1.5 times larger than the entire budget of the Department of Education. If, however, the tax cuts were held at their current level, the CBPP analysis indicates that the vast majority of the country would continue to receive the maximum benefits the tax cut can offer to them, the nation’s wealthiest tax payers would also continue to receive a substantial tax cut, and the country would have an additional $500 billion over the next 10 years to allocate to its priorities.

With so many pressing needs and with the American public’s full support behind an exchange of tax cuts for spending on education, health care, unemployment benefits, and a prescription drug benefit for the elderly, it remains unclear why the House Republican leadership continues to push to make the tax cuts permanent. As a Washington Post editorial noted today, contrary to the campaign speeches of the President and many other Republicans, "Right now, it looks a lot more like the federal government is shortchanging citizens over the long term than overcharging them." We need our representatives in Washington (for a list of the few who have, see OMB Watch’s "A Sacrifice Worth Making") to stand up to the "investment deficit" that will surely result from making the tax cuts permanent – a day when the government allocated the resources to ensure that all Americans had the education and training and opportunity and resources to provide for themselves and their families would indeed be something worth celebrating.

back to Blog