Freeze The Tax Cuts And Just Say No To More Tax Cuts
by Guest Blogger, 9/3/2002
It's time to seriously work towards freezing the tax cuts that are scheduled to be phased in 2004, and oppose all new tax cuts. This is one of the most important issues facing us as a nation, and will affect our lives for decades to come.
As most of us have heard, the recently released Congressional Budget Office (CBO) Budget and Economic Update projects both a growing budget deficit for this year and diminishing surpluses for the coming decade . According to that report, $845 billion of the $1 trillion surplus that might still occur in the decade from 2003 through 2012 will happen in 2011 and 2012, after the tax cuts enacted last year expire. (See this related Watcher article for more information on the CBO report.)
In spite of vague assurances (that are contrary to most accepted economic analyses) that the tax cuts are somehow helping the economy, their cost and the resulting deficits should lead to the more logical assumption that perhaps we can’t afford the tax cuts. After all, since the CBO estimates are based on current law—they do not take into account a prescription drug benefit for seniors, increased homeland security and military spending, the state fiscal crises, or other emergencies or needs that are likely to arise during the next decade—the possibility of any surplus over the next decade is a pretty shaky prospect. Whether the budget is in surplus or in deficit is not the real issue. The real issue is the political will to make the resources available for the country's priorities. However, it is politically much harder to make the case for more domestic investment to accomplish the priorities of ordinary Americans when there is a deficit, as we are now seeing. With looming deficits, the mantra of "fiscal responsibility" always translates into "cut domestic spending."
In spite of this picture and flying in the face of all the evidence that we can’t afford the tax cuts that are currently scheduled to go into effect, President Bush is expected to promote new tax expenditures, like reducing capital gains taxes, along with raising contribution limits for IRA’s and 401(k) accounts, revising the tax on corporate dividends, and increasing the limit on the amount that can be deducted for stock market losses. Once again, President Bush's solution is to provide tax benefits to the wealthiest -- benefits that will never trickle down to the rest of the country. While it is unlikely that any of these proposals will get passed this year, it is very likely that they will be used to attempt to influence voters to cast their ballot for the party that cuts taxes.
We think, and research shows, that many Americans would much rather see the return of a balanced budget, and resources to accomplish priorities like making sure Social Security is on a solid footing, or improving education, or providing some assistance to struggling states so that important services will not be cut, or passing a meaningful prescription drug benefit. While our priorities might vary, the fact is that without the resources, none of them will get accomplished.
While some will portray postponing the tax cuts that are scheduled to go into effect in 2004 as raising taxes, we think that it is simply good common sense. No blame game need be played. When the tax cuts were passed, there were projections of large surpluses to come. With the downturn in the economy and the attacks on September 11 and the threat of more attacks, we just don’t have the resources for more tax expenditures. Since the tax cuts are being phased in, it would be easy to simply freeze them for now.
OMB Watch is proud to be part of a coalition of nonprofit organizations who are advocating for freezing the tax cuts at current levels and opposing additional tax cuts. In August 2002, the coalition issued a call to freeze the tax cuts and oppose any further tax cuts. This is one of the most important issues facing the country right now, and will affect our future for decades to come. We urge you to take a look at this effort and contact your Members of Congress about it. If your organization is interested in the effort, please contact Stephenie Foster at People For the American Way at (202) 467-4999.