Citizens for Tax Justice 202-626-3780 • www.ctj.org        Monday, Feb. 7, 2005

Bush Budget Calls for Giant New Tax Cuts, Huge Reductions in Most Federal Programs

The fiscal 2006 budget presented by President George W. Bush today calls for massive new tax cuts likely to cost $2.4 trillion over the upcoming decade. At the same time, the President calls for huge reductions in most federal programs.

Most of the 10-years cost of the tax cuts proposed by the President would stem from extending his 2001 and 2003 tax reductions past their sunset dates (generally calendar 2008 or 2010). As proposed, the Bush tax cut plan oddly leaves out extension of individual alternative minimum tax (AMT) relief, but most observers believe that if Bush’s tax proposals are adopted, AMT relief will be enacted as well. Extending AMT relief would cost $771 billion over 10 years, according to the Congressional Budget Office, bringing the total cost of Bush’s latest tax cut program to almost $2.4 trillion over 10 years.

On the program side, Bush proposes cuts that by fiscal 2010 will range from 11 percent to 56 percent as shares of the economy (a measure that takes account of population and wage growth). The only major program increase will be in Medicare (mainly due to the new prescription drug benefit).

According to Bush’s budget, interest on the national debt will jump by 30 percent as a share of the economy from fiscal 2005 to fiscal 2010 (including interest paid to the Social Security trust fund). This is almost certainly an understatement, however, since Bush’s budget plan leaves out defense spending for Iraq and Afghanistan. When these added expenditures are counted, interest costs will balloon even further.

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