A Tax Cut a Week in the House
by Guest Blogger, 5/14/2004
In spite of the "PayGo" logjam over whether or not tax cuts ought to be offset, which continues to prevent passage of a budget resolution, the House persists with its "a tax cut a week" schedule.
In recent weeks, the House has passed tax cuts at a cost of over $500 billion over the next ten years - none of which is offset. They include:
- H.R. 4181 to make permanent expanded tax breaks for married couples.
- H.R. 4227 for a one-year adjustment of the Alternative Minimum Tax.
- H.R. 4275 (AMT) to make permanent the expanded 10 percent tax bracket.
This week, the House is scheduled to consider H.R. 4359, which would make the $1,000-per-child tax credit permanent.
These tax cuts were originally part of the first Bush tax cut (The Economic Growth and Tax Relief Reconcilation Act passed in 2001 at a 10-year cost of $1.3 to $1.6 trillion) and are scheduled to "sunset," or return to previous law, in 2005. All of the 2001 tax cuts were passed with complicated phase-in and sunset provisions through 2010. Permanent extension of all of the 2001 tax cuts â€” including those, such as the estate tax repeal, that benefit only the wealthiest â€” is high on the President's priorities. "Fixing" the AMT, which has not risen with inflation and threatens middle-class taxpayers with higher taxes, is also a high, but costly, priority. For more on the AMT, see an OMB Watch analysis.
While there is broad support for these three "middle-class" tax breaks, and for fixing the AMT, there is concern over the pricetag. However, efforts in the House to offset the costs, or make permanency contingent on balancing the budget, have failed.
What is rarely part of the discussion is the reality that the small monetary benefits to individual taxpayers will be offset by reductions in the services that we all depend upon. The money to pay for the tax breaks has to come from somewhere.
Even beyond the costs of the tax cuts â€” radically decreasing federal revenue even while the costs of the Iraqi conflict grow - the federal tax code is increasingly skewed in favor of investors over workers. An analysis by the Institute on Taxation and Economic Policy, released by Citizens for Tax Justice, shows that personal taxes on earnings are now two and one-half times greater than taxes on investment income. Another analysis by William Gale and Peter Orszag, published in The American Prospect, also presents evidence that "tax cuts enacted during George W. Bush's presidency shift the burden of taxation away from upper-income, capital-owning households and toward the wage-earning households of the lower and middle classes."