NCPA - National Center for Policy Analysis

The Gore Tax Plan Disguises New Spending As Tax Cuts

October 19, 2000

Vice President Al Gore's tax cut plan, which he claims will be worth $500 billion over the next 10 years, is actually "the biggest income redistribution program in history" that would not increase marginal incentives to save or invest, would retard economic growth, and would significantly increase the complexity of the tax code.

Those are some conclusions from a recent analysis by the Institute for Research on the Economics of Taxation. Furthermore, say the authors:

  • Most of the tax cuts are in the form of refundable tax credits -- which people can claim even if they owe no taxes.
  • The net size of the tax cuts are considerably smaller than the $575 billion Gore claims, with $96 billion in identified tax increases -- plus an additional $82 billion in revenue raisers in his overall budget plan -- reducing the net to $398 billion.
  • And since, according to a Senate Budget Committee majority staff report, budgetary rules require that refundable credits to nontaxpayers be treated as spending, the net is actually about $300 billion.

In addition, Gore says he would increase spending by $900 billion through 2010. However, the National Taxpayers Union's line-by-line analysis found spending increases would total $2.7 trillion. Thus for every $1 of tax cuts he claims, Gore would increase spending $6.75 by NTU estimates.

The "Retirement Savings Plus" program would provide a government match (refundable tax credit) that starts at 300 percent for a $500 annual contribution, but falls rapidly to zero. Although most taxpayers could not take advantage of this new entitlement (too poor, or middle class), a low income couple who began contributing at age 20, contributed the maximum amount every year and qualified for the maximum match, would receive a cumulative government subsidy of $1.7 million by age 65.

Source: Michael Schuyler and Stephen J. Entin, "The Gore Tax Plan: Redistribution, Not Reform," IRET Policy Bulletin No. 82, September 20, 2000, Institute for Research on the Economics of Taxation, 1730 K Street, N.W., Suite 910 Washington, D.C. 20006, (202) 463-1400.


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