The “fiscal cliff” debate in Washington has been cast as a choice between runaway Democratic spending and draconian Republican cuts, but no matter who wins the argument, both parties’ tax plans add to the deficit — by a minimum of $4.3 trillion through 2022, according to the nonpartisan Congressional Budget Office.
Republicans, who want to extend almost all of the George W. Bush-era tax cuts beyond their Jan. 1 expiration date and want to continue to delay the full alternative minimum tax, would deepen the deficit by $250 billion next year and $5.3 trillion over a decade, according to the CBO.
Democrats support delaying the full alternative minimum tax and want to extend all but the highest-income tax rates, which the CBO says would deepen deficits by $205 billion next year and $4.3 trillion over the same period.
“Everybody has forgotten that it is not just the tax cuts for the upper-income people; it is the entire package of Bush tax cuts that were unaffordable,” said Robert L. Bixby, executive director of the Concord Coalition, a bipartisan deficit watchdog.
Others were more blunt.
“It is time to take the plunge — let all the Bush tax cuts expire,” said David Stockman, who was a budget director for President Reagan. “They were unaffordable in 2001 and 2003, and now with $16 trillion of national debt and counting, they are a fiscal abomination.”
Lawmakers are trying to strike a deal by Jan. 1, when the 2001 income tax rate cuts expire and the 2003 cuts to dividends and capital-gains taxes also expire. On Jan. 2, $110 billion in automatic spending cuts, known as “sequesters,” take effect under the terms of last year’s bipartisan debt deal.
Both Republicans and Democrats have called for eliminating some tax loopholes and deductions, which could reduce CBO’s deficit projections. But so far, neither side has put forth a specific concrete plan to do so.
When the tax cuts were passed, Republicans controlled the Senate and House and did not offset the tax reductions with spending cuts. Because the tax cuts were passed without a supermajority in the Senate, they were scheduled to expire in 2010.
But with the economy slumping, President Obama and congressional Republicans struck a deal in late 2010 to extend most of the cuts for another two years.
The deal was part of a broader package that also extended unemployment benefits for 13 months, set the tax rate at 35 percent for estates valued at more than $5 million and included a one-year payroll tax reduction, with the employee contribution to financing Social Security dropping from 6.2 percent to 4.2 percent.
It also included a two-year “patch” on the alternative minimum tax and a number of other tax-reducing measures, known in Beltway-speak as “tax extenders.” Once again, the revenue reductions were not offset by spending cuts or tax increases, instead lumping billions of more dollars onto the nation’s credit card.
Each of those items meant new spending or lost revenue as a result of lower taxes — and none of it was offset with spending cuts.
Mr. Obama and Republican leaders also did not fully pay for a deal they hashed out late last year that kept the 2 percentage point payroll tax cut on the books, extended unemployment benefits again, and prevented doctors’ Medicare reimbursement rates from being cut. Earlier this year, Congress once again extended the reduction in the payroll tax — adding another $90 billion to the deficit.View Entire Story
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