Games Politicians Play: More Tax Cuts as U.S. Faces Large Deficits

[papau]

http://www.nytimes.com/2005/02/11/business/11norris.html

February 11, 2005
FLOYD NORRIS
Games Politicians Play: More Tax Cuts as U.S. Faces Large Deficits

<snip>In 2001, to make the tax cut add up to only $1.35 trillion over 10 years, some money was "saved" by repealing the cuts in 2011, the last year of the period. Most, but not all, of the cost of this year's package comes from extending those cuts.<snip>

Of the $1.1 trillion cost of making all the old tax cuts permanent, the estate tax provision costs nearly a quarter of that, or $256 billion. More could be saved by stopping the process of reducing the tax every year. That would also remove the incentive for assisted suicide in 2010.

Of the new Bush tax proposals, one crop calls for encouraging savings by making it even easier to avoid paying taxes on what used to be called unearned income. There is a gimmick there as well. The bill would encourage savers to move money from one type of individual retirement account to another, thus increasing tax receipts by $14.6 billion over the next four years - the period over which the president promises to reduce the deficit - while costing the government twice as much in the following six years.

Another $125 billion in costs comes from changing rules on deducting health insurance costs - changes that could encourage employers to cut back on the insurance they provide. In contrast, the budget calls for just $2.6 billion in additional collections from closing loopholes, and most of that is to come from foreign corporations.

The Bush proposals do not address the high cost of changing the alternative minimum tax to keep it from hitting the middle class too hard. That is left to a presidential commission to ponder after taxes are cut again.
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