Freeze the Tax Cuts
1. Due to the terrible events of September 11, the federal government will need to spend considerably more than previously anticipated to pay for anti-terrorism efforts and to aid our faltering economy.
2. These new emergency spending requirements have made the Bush tax cuts even more unaffordable.
3. Therefore, it is only prudent to impose a freeze on the future phase-ins of the Bush tax cuts.
4. Even if the freeze applies only to the future income tax rate reductions and estate tax cuts, it could save close to $500 billion in fiscal 2003 through 2011.
Fully phased in, some 84 percent of these frozen tax cuts would otherwise go to the best-off one percent of all taxpayers.
Addendum:
1. Necessarily, the government will dip deeply into the Social Security surpluses, this year and over the next few years.
2. When the emergency diminishes, however, those funds could be paid back to the trust fund by devoting a portion of future on-budget revenues to debt reduction. But that will not be possible unless the tax cuts are frozen.
| Potential Changes to the Phase-Ins of the Bush Tax Cuts | ||||||
| Fiscal Year |
Freeze tax rates at half point cut only | & PEPO* |
Drop changes |
Total | ||
| Top rate | Other rates | Subtotal | ||||
| 2002 | $ 1.3 | $ 5.3 | $ 6.6 | $ — | $ 0.1 | $ 6.7 |
| 2003 | 2.0 | 8.6 | 10.6 | — | 7.0 | 17.6 |
| 2004 | 5.0 | 13.3 | 18.3 | — | 5.6 | 23.9 |
| 2005 | 6.5 | 18.1 | 24.6 | — | 7.6 | 32.2 |
| 2006 | 15.0 | 27.1 | 42.0 | 1.7 | 4.6 | 48.3 |
| 2007 | 19.3 | 31.4 | 50.7 | 3.5 | 10.2 | 64.4 |
| 2008 | 20.3 | 31.3 | 51.6 | 5.4 | 12.4 | 69.4 |
| 2009 | 21.6 | 31.2 | 52.7 | 7.2 | 13.2 | 73.2 |
| 2010 | 22.8 | 31.1 | 54.0 | 9.4 | 23.5 | 86.9 |
| 2011 | 6.9 | 9.4 | 16.3 | 5.8 | 53.9 | 76.0 |
| 01-11 | $ 120.7 | $ 206.7 | $ 327.4 | $ 33.0 | $ 138.0 | $ 498.5 |
| *Pease is the partial disallowance of itemized deductions at upper-income levels. PEPO is the personal exemption phase out at upper income levels. Both are repealed (phased-out) in the Bush tax act. Source: Joint Committee on Taxation data, compiled by Citizens for Tax Justice, Sept. 2001 |
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