The Treasury reports that tax proposals pressed by the White House will cost the government billions in revenue, according to the Washington Post. The White House wants to make permanent the tax breaks for dividends and capital gains that expire at year end, 2008.
These tax breaks would cost the government $7.74 billion in 2008 and $37.02 billion in 2009, according to its “Blue Book” description of revenue proposals in the president’s fiscal 2007 budget. Further bad news comes with extending marginal tax rates for individuals, set to expire at year end 2010, that would drop revenues to $119.39 billion in 2011, according to the Treasury.
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In defense of these tax cut extensions, the White House said increased development from extending the breaks will lead to greater economic growth and investment. They see more revenue returns in the end, according to the Washington Post. Forbes reports that White House documents said, “Allowing tax relief to expire would result in large tax increases for millions of American families and businesses.”
Economic forecasts issued by the White House project revenue increasing to $2.42 trillion in fiscal 2007 and $2.29 trillion in the current fiscal 2006. The Washington Post reports that spending is projected to rise to $2.71 trillion in fiscal 2006 and up to $2.77 trillion in fiscal 2007.
With higher revenues, the budget deficit will drop from $423 billion in the current fiscal year, to $354 billion next fiscal year, according to the Washington Post. The deficit is projected to decrease to $223 billion in fiscal 2008 and down to $208 billion in fiscal 2009.
The government projects it will continue to lose revenues of $13.66 billion in fiscal 2006 as the president extends provisions shielding taxpayers from the Alternative Minimum Tax (AMT). These lost revenues increase to $20.5 billion in fiscal 2007, according to the Washington Post.
Instead of pushing tax reform, the Bush Administration is not pursuing its goal of tax overhaul this year. Treasury spokesman Tony Fratto told the Washington Post, “We’ll continue to work on that. We’re not going to set a timetable.” Forbes reports that Bush campaigned for re-election on streamlining “the mess of a tax code.”
The administration’s current tax proposals include permanent extension of lower income-tax rates, marriage penalty relief, $1,000-a-child tax credits, and a full repeal of federal estate taxes. These were part of Bush’s 2001 tax cut bill and set to expire in 2010, according to Knoxstudio.com. Continuing the cuts would result in losing another $210 billion in revenues.
AMT protection is not being sought by the administration for more than a year, as other changes to the tax code recommended by a presidential panel last year, if implemented, might actually raise taxes. AMT protection would be an essential balancing element, according to the Washington Post. Forbes reports that the Treasury has not made it proposals for tax reform yet.