Tax Cuts and Budget Forecasts
March 12, 2001
People fret about projected future deficits and surpluses simply because they know about them. In the past, Congress just appropriated and the president spent, and at the end of the year they totaled things up. That was the budget process.
Congress now uses 10-year budget forecasts; but the estimates are less reliable the farther out one goes. So if surpluses are larger or smaller than anticipated, Congress can raise or cut taxes accordingly -- they do it all the time, with ease.
- Of the 22 major tax bills enacted into law between 1968 and 1997, some raised taxes and some cut taxes.
- Fifteen of the major tax bills were passed between 1980 and 1997 -- of these, only three were tax cuts, and the rest increased taxes (see figure).
- Of the tax cuts, only one, the Economic Recovery Tax Act of 1981, was significant.
Congress and the White House undo tax cuts all the time, but only very seldom undo tax increases. Ronald Reagan reversed much of his 1981 tax cut the following year in the Tax Equity and Fiscal Responsibility Act of 1982, and signed into law six other major tax increases as well. And Bill Clinton's tax increase of 1993 still lives with us.
Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, March 12, 2001.
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