Tax Cuts vs. Deficits
By Phil Izzo
WSJ
Washington has struggled with dealing with the long-term U.S. deficit while supporting short-term growth. An analysis from forecasting firm Macroeconomic Advisers suggests that letting tax cuts expire just for higher-income Americans strikes that balance.
According to MA economists, the expiration of any of the tax cuts will depress economic growth, but the effects are more pronounced if the reductions run out for everyone. “Full sunsets would shave 0.9 and 0.3 percentage point off real GDP growth in 2011 and 2012, respectively,” the report says. “Allowing only tax cuts on high-income individuals to sunset would trim only 0.2 percentage points from growth over both 2011 and 2012.” Allowing the cuts to expire for everyone is also expected to boost the unemployment rate — currently at 9.5% — by 0.6 percentage point.
As Real Time Economics recently noted, ending the tax cuts won’t make a huge dent in the deficit. The Tax Policy Center points to Treasury estimates that show a cost of $199 billion in fiscal year 2011 and $3.7 trillion over 10 years for extending all the tax cuts. Meanwhile, the cost of extending them only for under $250,000-a-year taxpayers, as President Barack Obama proposes, is $167 billion in fiscal year 2011 and $3.0 trillion over 10 years.
(More here.)
WSJ
Washington has struggled with dealing with the long-term U.S. deficit while supporting short-term growth. An analysis from forecasting firm Macroeconomic Advisers suggests that letting tax cuts expire just for higher-income Americans strikes that balance.
According to MA economists, the expiration of any of the tax cuts will depress economic growth, but the effects are more pronounced if the reductions run out for everyone. “Full sunsets would shave 0.9 and 0.3 percentage point off real GDP growth in 2011 and 2012, respectively,” the report says. “Allowing only tax cuts on high-income individuals to sunset would trim only 0.2 percentage points from growth over both 2011 and 2012.” Allowing the cuts to expire for everyone is also expected to boost the unemployment rate — currently at 9.5% — by 0.6 percentage point.
As Real Time Economics recently noted, ending the tax cuts won’t make a huge dent in the deficit. The Tax Policy Center points to Treasury estimates that show a cost of $199 billion in fiscal year 2011 and $3.7 trillion over 10 years for extending all the tax cuts. Meanwhile, the cost of extending them only for under $250,000-a-year taxpayers, as President Barack Obama proposes, is $167 billion in fiscal year 2011 and $3.0 trillion over 10 years.
(More here.)
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1 Comments:
Deficits are caused by spending more than what is coming in. If less is coming in, why can't we ever talk about spending less?
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