Now you see it, now

Now you see it, now you don't!

Robert Greenstein and Joel Friedman,of the Center for Budget and Policy Priorities,report on a "Budget Rule Change [that] Would Make the Cost of Extending the Tax Cuts Disappear"

"The President’s 2005 budget includes a legislative proposal to change the budget rules so that the cost of extending the 2001 and 2003 tax cuts would be incorporated into the official budget “baseline.” Under existing rules, the baseline is required to reflect current law and thus shows the tax cuts expiring. As a result, official estimates by the Congressional Budget Office, the Joint Committee on Taxation, and the Treasury Department all show proposals to extend these tax cuts as having large costs. If the Administration’s proposed change to the baseline rules is implemented, however, the official estimates would show proposals to make the 2001 and 2003 tax cuts permanent as having zero cost...

The audacity of the Administration’s proposed change becomes apparent when the proposal is considered in the context of the budget gimmick used to facilitate passage of the 2001 and 2003 tax cuts. The Administration and the Congressional leadership wrote sunset dates into the 2001 and 2003 tax cuts for the purpose of making the cost of those tax cuts look smaller. This allowed more tax cuts to be packed into the legislation without breaching Congressional budget limitations. This gimmick worked because CBO was required under the rules to assume that the tax cuts would, in fact, expire and would thus have no cost in the years after they to sunset.

The Administration’s proposed change to the baseline rules... would require CBO to reverse its earlier approach and assume now that there would be no cost associated with extending these tax cuts beyond their sunset dates..."

The two page hand out describes and critiques the administration's formal rationale for this proposal.

Revised 3-3-04