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Economic News, Data and Analysis

Cost of tax cuts

Looks like the president’s FY’07 budget will include an estimate of the cost of extending the tax cuts past 2010. Since Bush took over, the White House has only been doing 5-year budgets (rather than the standard 10-year). And this is the first time that the tax sunsets will have made it into that 5-year window.
Note that the $118.3 billion number mentioned below is a fiscal year number, while the tax cuts expire at the end of the calendar year. So the fiscal year cost only includes 3 quarters of an extension. A closer back-of-the-envelop estimate of the annual cost is simply $118.3 x 4/3 = $157.7 billion.

Bloomberg.com: U.S.
Bush’s 2007 Budget to Reveal Cost of Making Tax Cuts Permanent
Jan. 13 (Bloomberg) — U.S. President George W. Bush faces a day of reckoning next month when he presents a budget that for the first time will account for the cost of making permanent his first-term tax cuts, which may widen the deficit by at least $118.3 billion in 2011.
Bush’s budget request for the 2007 fiscal year, due to be submitted Feb. 6 to Congress, will be the first to include the revenue impact of extending the tax cuts after 2010. The biggest cuts are currently slated to expire in 2009, and Bush wants to make them permanent. Presidential budgets project the fiscal impact of tax and spending policies on a five-year basis.
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Filed under: Economics

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