Democrats, Republicans Argue Over Bush Tax Cuts Cost

by Leroy Baker, Tax-News.com, Washington

12 October 2001

Initial estimates by the non-partisan Joint Tax Committee on the tax cuts proposed by the Bush administration as part of an economic stimulus package have found that the total cost to government could be between $90 and $120 billion which far outstrips President Bush's calculation of between $60 and $75 billion.

The amount of revenue loss hinges on whether the tax cuts will be made permanent or temporary. If permanent the cost could be as much as $440 billion over a 10 year period but this could be cut down to $100 billion if temporary measures were introduced. Democrats and Republicans have opposing views on how to take the tax cuts forward.

For example, a major provision involves writing off 30 per cent of the cost of assets such as computer equipment which would reduce the government's tax revenue by $48 billion. This could be recouped if introduced on a temporary basis as suggested by the Democrats, but if the Republicans get their way it could be made permanent, costing $265 billion over 10 years.

The most expensive provisions are to be found in President Bush's plan to speed up some tax cuts which were due to take effect in 2006 and implement them this year instead. This would result in a reduction in revenue by $121 billion over the next 10 years - likewise, cutting the 27 per cent tax rate to 25 per cent four years early is expected to cost in excess of $53 billion.

White House spokesman, Ari Fleischer, said: 'The president thinks it's important for the stimulus to pass and pass quickly and to pass in a manner that gets relief to people quickly.'

House Republican Leader, Dick Armey, said the package will focus largely on employment, capital tax gains and scrapping the corporate alternative minimum tax. 'Pro-growth tax cuts are the necessary solution to fuelling our economy that was significantly damaged by the (September 11) attack,' he claimed.

'The president wants a bipartisan bill,' Mark Weinberger, assistant treasury secretary for tax policy told reporters. 'We will continue to work with members of both parties to achieve that.'

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