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TAx Revenue is UP? is DOWN? |
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May 21, 2006
Despite Pledge, Taxes Increase for Teenagers
By DAVID CAY JOHNSTON
The $69 billion tax cut bill that President Bush signed this week tripled tax rates for teenagers with college savings funds, despite Mr. Bush's 1999 pledge to veto any tax increase.
Under the new law, teenagers age 14 to 17 with investment income will now be taxed at the same rate as their parents, not at their own rates. Long-term capital gains and dividends that had been taxed at 5 percent will now be taxed at 15 percent. Interest that had been taxed at 10 percent will now be taxed at as much as 35 percent.
The increases, which are retroactive to the first day of the year, are expected to generate nearly $2.2 billion over 10 years, according to the Congressional Joint Committee on Taxation, which issues the official estimates.
Over all, the tax bill that Mr. Bush signed Wednesday reduces taxes by $69 billion.
Mr. Bush pledged in 1999 to veto any bill that raised taxes. In response to a question about the tax increase on teenagers in the new legislation, the White House issued a statement Friday that made no reference to the tax increase, but recounted the tax cuts the administration has sponsored and stated that President Bush had "reduced taxes on all people who pay income taxes."
Challenged on that point, the White House modified its statement 21 minutes later to say that Mr. Bush had "reduced taxes on virtually all people who pay income taxes."
The deputy White House press secretary, Kenneth A. Lisaius, declined to discuss the reasons Mr. Bush broke his pledge or anything else beyond the modified statement, which emphasized the $880 billion in tax reductions from tax laws Mr. Bush signed in 2001 and 2003.
...
"If elected president, I will oppose and veto any increase in individual or corporate marginal income tax rates or individual or corporate income tax hikes," he wrote in June 1999 to Grover Norquist, president of the Americans for Tax Reform.
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Bush's tax cuts will reduce Treasury revenue, studies show
By Kevin G. Hall
KNIGHT RIDDER
WASHINGTON - When President Bush signed legislation Wednesday to extend lower tax rates for capital gains and dividend income through 2010, he suggested that his tax cuts were behind a surge of new revenue into the Treasury, and implied that it was enough to offset the revenue lost by these reductions.
At a ceremony on the White House lawn, Bush said his tax cuts had helped the economy grow, "which means more tax revenue for the federal Treasury."
That's just not true. A host of studies, some of them written by economists who served in the Bush administration, have concluded that tax reductions mean less money for the Treasury.
The cuts Bush extended Wednesday will cost the Treasury an estimated $70 billion over five years. They may help spur economic growth, but they still lose more revenue than they generate. And unless they're matched by lower federal spending, they worsen federal budget deficits.
To be sure, tax revenues grew by $274 billion in 2005, a 15 percent increase over the previous year, and receipts are growing this year, too.
But does that mean the president's 2001 and 2003 tax cuts generated enough additional revenue to pay for themselves?
"No," said Douglas Holtz-Eakin. He was the chief economist for Bush's Council of Economic Advisers in 2001 and 2002, then the director of the nonpartisan Congressional Budget Office until late last year.
Holtz-Eakin said other factors were behind the surge in tax revenues. One is that revenues rise as the population and the economy grow. Revenues would have risen in the post-2001 economic recovery with or without tax reductions, just as they did in the '90s.
Treasury Secretary John Snow conceded Tuesday that the much-touted tax cuts for capital gains and dividend income don't drive today's strong economy.
Asked by Knight Ridder if the tax reductions paid for themselves, Snow acknowledged that they don't. He also acknowledged that economic growth and stock market gains were strong in the late 1990s, when the capital-gains tax stood at 20 percent and dividend income was taxed at rates as high as 38.6 percent. ...
A Harvard University paper in December concluded that up to 50 percent of a cut in capital-gains taxes would flow back to the Treasury in new revenues.
"The feedback is surprisingly large," concluded Gregory Mankiw, the study's co-author. He headed Bush's Council of Economic Advisers from 2003 to 2005.
Mankiw's study also concluded that the Treasury payback would be 17 percent of the tax-cut's cost if the reduction were on wages instead of capital.
That's in line with a December study by the CBO. It looked at a hypothetical 10 percent cut in income-tax rates. It concluded that up to 22 percent of the lost revenue could be regained over five years, and up to 32 percent over five more years.
But paybacks of 50, 17, 22 or 32 percent still mean a net revenue loss for the Treasury.
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http://zfacts.com/p/374.html | 01/18/12 07:19 GMT
Modified: Tue, 23 May 2006 19:19:34 GMT
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