Revised July 6, 2000
Cost of Tax Cuts the House or Senate Has Passed
Or Are Expected to Pass Soon Total $649 Billion
by Jim Horney
Congress has already staked a claim on a substantial portion of the non-Social Security surplus anticipated over the next decade. If the Senate passes the "marriage-penalty" legislation the Finance Committee has proposed, tax cuts that the House, the Senate, or both chambers have approved this year would consume $649 billion over 10 years. These tax cuts include:
- $248 billion in tax cuts over 10 years included in the "marriage-penalty" tax bill the Senate Finance Committee reported and the Senate may consider the week of July 10 (the House passed a somewhat less expensive version of the bill earlier this year);(1)
- $104 billion in tax cuts from a phased-in repeal of the estate tax, which the House passed on June 9. (The cost of the bill in 2001 through 2010 greatly understates the true effects of the legislation because the estate tax repeal is phased in slowly. In 2011 through 2020, the legislation is likely to reduce revenues by more than $500 billion.)
- $122 billion in tax cuts in a bill the House passed March 9 that was portrayed as a measure to offset the cost of a higher minimum wage to small business, although the majority of the bill's tax cuts are estate tax reductions that have little to do with small business (and would be superceded by the estate tax repeal the House passed June 9);
- $103 billion in tax cuts contained in bankruptcy legislation the Senate passed in early February, which Congressional leaders are seeking to reconcile with a bankruptcy bill the House passed last year;
- $51 billion in excise tax cuts from the repeal of the telephone tax passed by the House on May 25;
- $21 billion in education-related tax cuts the Senate approved March 2; and
- $4 billion in reduced revenues resulting from the extension of duty-free and quota free treatment of specified products imported into the U.S. from certain sub-Saharan African and Carribean Basin nations.
When duplication among the bills is eliminated, the aggregate revenue loss from their tax cuts equals $531 billion over 10 years and $154 billion over five years, with much of that amount consumed by tax cuts predominately oriented toward higher-income individuals. The budget resolution allows for additional tax cuts that could bring the five-year reduction in revenues to at least $175 billion. As the cuts passed by the House or Senate would absorb money that otherwise would be available for paying down debt, they would result in higher interest payments on the debt. The increased interest payments would amount to $118 billion over 10 years. The total cost of the tax cut proposals that have won approval this year thus would be $649 billion over 10 years, and $171 billion over five years.
Committing the federal government to these tax cuts would mean that $649 billion over the next decade would not be available for other purposes, such as bolstering the Medicare trust fund or reducing child poverty.
1. The $248 billion cost of the Senate bill does not take into account the effect of a provision included in the bill that would sunset the proposed changes in tax law at the end of calendar year 2004. This provision was included in the bill solely to avoid procedural hurdles in the Senate. It is extremely unrealistic, however, to assume that lawmakers would actually allow the marriage penalty changes included in this legislation to expire after just a few years.