As a fitting kick-start to a year in which President Bush is expected to push hard to make his expensive and unbalanced tax cuts permanent, two new tax cuts went into effect that almost exclusively benefit high-income households. These tax cuts, referred to as "PEP" and "Pease," were enacted in 2001 but did not go into effect until 2006--an underhanded but politically advantageous move that kept the total cost of the 2001 tax cut package within set budget limitations. PEP, which stands for "personal exemption phase-out," and Pease, named after former Rep. Don Pease (D-OH), were tax increases enacted in the 1990's as part of a true deficit reduction package, and are now being phased out through 2010. The PEP provision prevents high-income earners from claiming a personal exemption ($3,200 in 2005) for each member of their household, while the Pease provision limits the value of itemized deductions for taxpayers with high incomes. With the phase out of these provisions, high income earners will be able to both claim higher exemptions and itemize more deductions. Together these tax cuts will cost $27 billion over the next five years (roughly two-thirds of the amount Republican leaders claim will be "saved" with the budget cuts bill). These tax giveaways will primarily wind up in the pockets of the rich, who have already benefited enormously under Bush--such as those with annual incomes of over $1 million who have received an average windfall of $103,000 in 2005 from the president's first-term tax cuts. Now, thanks to the phasing out of PEP and Pease, by 2010 taxpayers earning over $1 million will see an average additional tax kickback of $19,234. Those making between $75,000 and $100,000 will see an average of $1, and those making less than $75,000 will see nothing. As the chart below illustrates, nearly all of the benefits of these two tax cuts will go to households with incomes over $200,000: Source: Center on Budget and Policy Priorities, http://www.cbpp.org/12-28-05tax.htm Along with PEP and Pease, President Bush is prepared to take his tax-cutting mania even further, commenting on Jan. 7 on his plans to push for making his 2001 and 2003 tax cuts--which cost roughly $1.7 trillion over ten years--permanent that:

"We're seeing new evidence of how our tax cuts have created jobs and opportunity, [and] some people in Washington are saying we need to raise your taxes. They want the tax cuts to expire in a few years, or even repeal the tax cuts now."

The tax cuts to which he was referring are largely responsible for the nation’s transition from budget surpluses to enormous budget deficits, because they have so significantly reduced the revenue base. Making the cuts permanent would solidify a structural deficit that would ultimately bankrupt the country, as defense and homeland security spending continue to claim an ever-larger portion of the budget, as the Baby Boomers put increasing demands on entitlement programs, and as the interest on the national debt skyrockets.