Revised March 15, 2000
Cost of Tax Cuts That Either the House or Senate Has Passed Total $470 Billion
Tax Cuts Would Absorb Majority of Non-Social Security Surplus
Even Before Congress Starts Debate on a Budget Resolution
Congress already has staked a claim on more than half of the non-Social Security surplus anticipated over the next decade and nearly three-fourths of the surplus projected over the next five years although neither the House nor the Senate has yet approved a budget. Tax cuts the House, the Senate, or both chambers have passed so far this year would consume $470 billion over 10 years.
The tax bill the House passed on March 9, portrayed as a measure to offset the cost of a higher minimum wage to small business despite the fact that the majority of its tax cuts are estate tax reductions, would cost $122 billion over ten years. Other legislation the House or Senate has approved in recent weeks includes:
- $182 billion over ten years in marriage-penalty tax reductions the House has passed;
- $103 billion in tax cuts contained in bankruptcy legislation that the Senate passed in early February and that will soon go to conference with a bankruptcy bill the House passed last year; and
- $21 billion in education tax cuts the Senate approved March 2.
When duplication among the bills is eliminated, the aggregate revenue loss from their tax cuts equals $384 billion over ten years. As this would absorb money that otherwise would be available for paying down debt, it would result in higher interest payments on the debt; the increased interest payments would amount to $86 billion over ten years. The total cost of the tax cut proposals that have won approval this year would be $124 billion over five years and $470 billion over ten years.
Even before beginning debate on a budget plan that establishes priorities among debt reduction, tax cuts, and initiatives such as a Medicare prescription drug budget, Congress thus is moving to use up for tax cuts 72 percent of the $171 billion the Congressional Budget Office projects in non-Social Security surpluses over the next five years and 53 percent of the $893 billion surplus projected for the coming decade. (These surplus projections reflect the latest CBO estimates, released on March 9.) These amounts would be consumed for tax cuts predominately oriented toward higher-income individuals.
The Administration's budget, by contrast, would use 53 percent of its projected non-Social Security surpluses over the next 10 years to pay for all of its tax and program initiatives combined. The Administration's budget devotes the remaining 47 percent of projected non-Social Security surpluses to paying down debt and bolstering the Medicare trust fund.
Committing the federal government to these tax cuts would mean that $470 billion over the next decade would not be available for other purposes. Passing these tax cuts before fashioning or debating a budget resolution the mechanism through which Congress is supposed to set fiscal priorities is essentially a decision to give these tax cuts precedence over all other potential needs, including greater debt reduction, expanded health care coverage for low-income working parents through an expansion of the Child Health Insurance Program as the Administration has proposed, establishment of a prescription drug benefit for Medicare beneficiaries, and reforms in the Alternative Minimum Tax to prevent the AMT from hitting growing numbers of middle-class families in the years ahead. Passing large tax cuts of this nature before a budget resolution is debated limits the opportunity for Congress and the public to engage in a policy debate over appropriate budget priorities for the nation.
A Center on Budget and Policy Priorities analysis, Costly House Tax Bill That Accompanies Minimum-Wage Legislation Would Largely Benefit High-Income Individuals, is available of the principal provisions of the "Small Business Tax Fairness Act of 2000" (H.R. 3832), the tax bill accompanying minimum-wage legislation the House passed on March 9.