April 2, 2001

Cost of Tax Cut Would More Than Double to $5 Trillion in Second Ten Years

Tax Cut Would Worsen Deteriorating Long-term Budget Forecasts

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On April 2, the Center on Budget and Policy Priorities released a report, Cost of Tax Cut Would More Than Double to $5 Trillion in Second Ten Years. The report explains that because the Bush tax cuts (in the form the House of Representatives is passing them) would phase in slowly, their cost in the second ten years provides a better picture of their budgetary impact than their cost in the first decade. In that second ten-year period — 2012 to 2021 — the cost of the tax cuts would more than double, reaching $5 trillion. The report also notes that while budget projections for the next ten years have improved, long-term budget projections have worsened. As a result, the budgetary room for large, permanent tax cuts or spending increases has contracted, rather than expanded. A tax cut of the dimensions now being considered could cause significant budget problems in the future. The report's findings include:

The cost for the second ten years might be reduced by several hundred billion dollars if highly effective measures can be designed, enacted, and enforced to rein in the substantial income tax avoidance that the Joint Tax Committee has concluded will occur as a result of repeal of the estate tax. It is unclear, however, whether this is achievable.