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A Silver Lining
Daily Policy Digest

Tax Issues / Taxes

Monday, April 28, 2003
The Bush Administration is understandably upset that its proposal for a $726 billion tax cut has effectively been watered down to $350 billion in the Senate and $550 billion in the House. However, this is less of a barrier to enactment of the administration's initiative than it may appear at first glance, says Bruce Barltett.

Also, there is the problem of Senator Charles Grassley (R-Ia.), chairman of the Senate Finance Committee, who gave his word to Senators George Voinovich (R-Ohio) and Olympia Snowe (R-Maine) not to support a tax cut larger than $350 billion in conference.

  • House leaders think refusing to go to conference and forcing a Senate vote on a $550 billion House bill can avoid this prohibition.
  • The Senate parliamentarian has ruled that despite a proviso in the budget resolution limiting the tax cut to $350 billion in the Senate, a $550 billion bill could be passed under reconciliation rules in this way.
Finally, just to make the situation totally incomprehensible, the $350 billion or $550 billion limit is an aggregate, 10-year figure. There is nothing in the budget resolution that says such a tax cut must be done in $35 billion or $55 billion per year increments.

Therefore, in theory, Congress could enact a $350 billion or $550 billion tax cut that is in effect for just a single year and then expires, and still fit within the parameters of the budget resolution. Indeed, it is almost certain that whatever tax cut Congress enacts will be front-loaded in order to maximize its short-run stimulus.

At the end of 10 years, the House resolution foresees a return to a budget surplus. (see figure).

Source: Bruce Barlett, "Silver Lining," National Center for Policy Analysis, April 28, 2003.

For text
http://www.ncpa.org/edo/bb/2003/bb042803.html

For more on Taxes
http://www.ncpa.org/iss/tax/

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