Repealing Tax Cuts Won't Pay for Deficit
April 21, 2004
Senator John Kerry advocates repealing all tax cuts for upper-income Americans in order to significantly reduce the federal deficit. However, using favorable assumptions, returning the two top income tax brackets to their original levels and taking back the 15 percent tax rate on dividend income (for all taxpayers) would generate approximately $47 billion -- a 10 percent reduction in the deficit.
In addition, Tax Foundation researchers found that:
- If lawmakers also restored all taxpayers back to their original tax rates, they would generate $70 billion more in revenue.
- The repeal of "middle-class" tax cuts such as the marriage penalty and the adjustment to the Alternative Minimum Tax would raise an additional $26 billion.
- Returning the value of the child tax credit to its old level of $500 per child would increase revenues by another $21 billion.
Thus, undoing all of the major Bush tax cuts would raise a total of $164 billion in "new" tax revenues, roughly one-third of what is needed to erase the deficit. The Tax Foundation calculates that the deficit is well in excess of the $404 billion in income taxes that will be collected from every taxpayer making more than $200,000 this year.
Therefore, to balance the budget on the back of these upper-income Americans would require tax rates more than double what they are today, explains the Tax Foundation.
Source: Scott A. Hodge and J. Scott Moody "Don't Repeal Tax Cuts for the 'Rich,' Cut the Spending Stupid," Tax Foundation, March 10, 2004.
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