WASHINGTON – With the Senate expected to vote this week on the so-called
"Trifecta" bill, which includes a permanent reduction in the estate tax,
temporary extension of several expiring tax provisions and a new mandatory
spending program for mine reclamation along with an increase in the minimum
wage, The Concord Coalition reiterated the importance of offsetting the deficit
impact of all tax cuts and spending increases.
WASHINGTON – With the Senate expected to vote this week on the so-called
"Trifecta" bill, which includes a permanent reduction in the estate tax,
temporary extension of several expiring tax provisions and a new mandatory
spending program for mine reclamation along with an increase in the minimum
wage, The Concord Coalition reiterated the importance of offsetting the deficit
impact of all tax cuts and spending increases.
"The real ‘trifecta’ here is fiscal myopia, budgetary gimmicks and legislative
logrolling," Bixby said.
"This bill will increase the deficit by $310 billion through 2016, with 83
percent of that coming after 2011 when the budget will be strained by rising
entitlement costs. Moreover, the bill continues a pattern of hiding long-term
costs by pretending that a number of popular tax breaks will expire after 2007.
Then, as an inducement for passing the estate tax reduction which would probably
not pass as a stand-alone measure, the bill tacks on an increase in the minimum
wage and an assortment of targeted provisions such as a new mandatory spending
program for mine reclamation," Bixby said.
The centerpiece of the bill is a permanent reduction in the estate tax, which by
2016 will drain more than $62 billion per year in revenues. In an
issue brief
on the estate tax released before the Senate voted on legislation making
estate tax repeal permanent, Concord stated, "Legislation with a lasting impact
on revenues, such as permanently repealing or reducing the estate tax, must be
considered within the context of future spending obligations. Projected
entitlement benefits far exceed the revenues dedicated to pay for them over the
long-term. Unless Congress enacts major reforms slowing the growth of
entitlement spending, revenues will need to increase well above current levels
to meet these obligations. In light of the costs associated with the baby
boomers’ retirement and health care costs, Congress should defer action on the
estate tax and extension of other expiring tax cuts until reforms controlling
the growth of entitlement spending are enacted. Doing the opposite puts the cart
before the horse."
"The refusal of the Senate to permanently eliminate the estate tax should have
sent a message about the need to deal with our looming fiscal problems first,"
said Concord Coalition Policy Director Ed Lorenzen. "Instead, the Congressional
leadership is attempting to buy support for their budget strategy by adding
other debt-financed tax cuts and a new mandatory spending program with costs
well in excess of the new revenues dedicated to the program. This may be a
clever legislative strategy, but it is an irresponsible fiscal policy."
"Not only has Congress failed to adopt a budget resolution for this year, but
passage of the ‘trifecta’ bill would exceed by about $12 billion the remaining
budgetary limits for tax cuts and entitlement increases imposed by last year’s
budget resolution, " added Bixby. "Budgeting is about making choices among
competing priorities, but this Congress appears incapable of making choices or
setting priorities."
A recent report issued by the Treasury Department providing a dynamic
analysis of proposals to permanently extend the 2001 and 2003
tax cuts illustrate the importance of offsetting the
revenue loss from tax cuts. Advocates of reducing the estate tax argue that it
will increase economic growth by encouraging savings and increasing capital
stock (though the Treasury report acknowledges the evidence on this is
uncertain). However, the report noted that "when lower taxes on capital income
are financed initially by issuing government debt, private investment is crowded
out by an increase in government borrowing," limiting the economic benefit from
the tax cuts.
"The Treasury report demonstrates that the pay-as-you-go principle is not simply
a matter of bookkeeping, but a key element of sound economic policymaking," said
Lorenzen. "Unfortunately, the estate tax bill currently being considered by the
Senate ignores this lesson and further undercuts any potential economic benefit
by adding debt-financed spending and tax cuts to the proposal."
The Concord Coalition is a nonpartisan, grassroots organization dedicated to
balanced federal budgets and generationally responsible fiscal policy. Former
U.S. Senators Warren Rudman (R-NH) and Bob Kerrey (D-NE) serve as Concord’s
co-chairs and former Secretary of Commerce Peter Peterson serves as president.
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CONTACT:
Tristan Cohen
(703) 894-6222
[email protected]
